Seagate Technology (STX) has a strong position in the data storage industry, which is vital for AI applications. Along with Western Digital, Seagate controls about 80% of the market. The surge in demand for storage from AI companies has played a key role in Seagate’s success. Its stock has risen by 219% this year and it has seen a 39% annual return over the last five years. This positive trend matches the strong earnings outlook in the booming AI sector. Many investors view Seagate as an attractive AI stock. It currently has a moderate buy rating and a 12-month target price of $268. However, Western Digital remains a solid competitor, offering a better price-to-earnings ratio at 22. The AI Insights portfolio shows an impressive 5.17% gain from a $300 investment, highlighting the strength of the AI sector. In comparison, a control fund, the Vanguard Total Stock Market Index Fund, only saw a 0.56% gain. Past picks like Micron Technology, which gained 20% in just four weeks, reinforce the strong performance of AI-related stocks lately. We see Seagate as a “picks and shovels” play in the AI boom. Major cloud companies like Amazon and Microsoft announced more data center expansions last month, leading to increased demand for storage. This trend benefits both Seagate and Western Digital, who together dominate the market. Historically, Seagate’s stock has risen to the $285 level by 2025, with implied volatility currently high, in the 75th percentile of its 52-week range. This creates an attractive opportunity for selling options for those who believe the stock will stay stable or increase. Selling cash-secured puts on minor dips, aimed for late December 2025 or January 2026 expiration, lets traders earn income or buy shares at a better price. For those looking for direct bullish exposure but hesitant about the high cost of options, a bull call spread is a smart choice. We suggest buying a January 2026 $290 call while selling a $310 call to finance this strategy. Though it caps potential gains, it lowers the entry cost and limits risk if the AI momentum slows in the next few weeks. This scenario mirrors the late 1990s when internet infrastructure suppliers saw massive growth before their valuations became too high. With Seagate’s next earnings report due in late January 2026, buying some out-of-the-money puts that expire in February could be a low-cost hedge against unexpected results. Industry reports from Q3 2025 indicated a 35% year-over-year increase in demand for high-capacity drives, but any hints of slowing growth might lead to a sharp market correction.

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