AI heavyweights are spending an estimated $828 billion on chips, data centres and related infrastructure this year. Simply Wall St says investors may favour firms with high return on equity and solid balance sheets as that spending draws scrutiny. Its quality screen highlights three stocks: Microsoft, Western Digital and Lam Research. Microsoft spent $37.5 billion on capital expenditure last quarter, funded by its cloud business. Western Digital, now focused on high-capacity hard drives, has a market value of about $148 billion. Its hard disk drive segment brings in about $14.5 billion in revenue. Lam Research has a market value of roughly $317.8 billion. Its wafer-processing equipment and services generate about $26.1 billion in revenue. The screen found 21 more companies with similar profiles.

Western Digital shares returned 217.1% in the year to October 29, 2026, against 13.3% for the S&P 500. They have fallen 27.4% since July 31. Cloud customers drive the company's growth. They made up 88% of fiscal first-quarter 2027 revenue, which rose 54% from a year earlier on demand for high-capacity hard disks. Western Digital shipped 22% more exabytes of storage in the quarter, and its average price per terabyte rose 28%. It expects to ship HAMR products in volume in the first half of calendar 2027 and sees room to raise prices further. A Trefis scenario that caps revenue growth at 30% a year puts revenue at $31.8 billion in three years, up from $14.5 billion. That would lift the shares about 44.9%. The next report, due in January 2027, will show whether cloud growth holds.

Western Digital's stock has fallen more than 50% from its June high of just under $800 and now struggles to stay above $400. Investors have soured on memory and storage stocks, though Western Digital has fallen harder than peers such as Micron Technology. On October 22, the company reported first-quarter fiscal 2027 revenue of $4.4 billion, up 55% year on year. Operating income rose 158% to more than $2 billion, driven by AI-related demand for storage. It also raised its dividend by 17%, though the yield is just 0.2%. Over three months the stock has dropped 26%, while the State Street Technology Select Sector SDPR ETF rose 7%. Investors may fear more competition and slower AI spending. Even with a price-to-earnings multiple of 13, the author sees no compelling buy given volatile earnings and an uncertain outlook.