Seagate

Demand for storage is so strong that Seagate has already locked in almost all of its production through the end of 2027 with the biggest cloud companies. In its most recent quarter, revenue jumped 44 percent from a year earlier to 3.1 billion dollars, and growth actually doubled compared to the quarter before.

Seagate is squeezing far more profit out of each drive than it used to. Gross margin climbed 11 points in a year to 47 percent, and the company generated 953 million dollars in free cash flow in a single quarter, its highest level in nearly a decade. It used that cash to pay down 641 million dollars of debt and earned a credit upgrade to investment grade.

This is a boom-and-bust industry. Today's strength is fueled by enormous spending on artificial intelligence data centers, and that spending will not stay this high forever. If the big cloud companies slow down, Seagate's sold-out order book could turn into too much capacity, and the stock could fall fast.

The stock has roughly doubled in the past year and now trades at well over 40 times expected earnings, far richer than its closest rivals. At that price there is little room for error, so any stumble in rolling out its new high-capacity drive technology could trigger a sharp pullback.