The Smartest Growth Stocks to Buy With $500 Right Now

Applied Digital's revenue jumped 139% year over year to $126.6 million in fiscal Q3 2026, and the company has a $16 billion contracted lease revenue pipeline that should accelerate as 500 MW of additional capacity comes online. Western Digital has already sold out HDD capacity for 2026 amid strong AI data-center demand, with earnings projected to rise from $4.93 per share last fiscal year toward $19.09, implying further upside. The article is broadly constructive on both stocks, with analyst targets and supply shortages reinforcing the positive outlook.

Analysis

APLD and WDC are both levered to the same macro setup but in very different ways: APLD is a capacity monetization story, while WDC is a pricing power story. The first-order read is bullish for both, but the second-order effect is that scarce AI infrastructure is shifting bargaining power upstream and downstream at the same time: hyperscalers are forced to pre-commit to compute nodes, and data-retention economics are forcing them to lock in storage supply well ahead of demand.

The more interesting signal is that WDC's shortage dynamics can persist even if AI capex growth moderates, because the inventory and qualification cycle in storage is long and sticky. That makes the upside less about terminal AI euphoria and more about a supply discipline regime — meaning the earnings power can rerate before unit demand peaks. For APLD, the market may still be underestimating execution risk: the backlog is valuable only if power, interconnect, and build timelines stay on schedule, and any slippage pushes cash flows to the right while interest expense keeps compounding.

The consensus may also be overconfident on how cleanly the AI benefit accrues to the named winners. APLD's lease economics could be partly competed away over time as new entrants and hyperscalers internalize more of the stack, while WDC's upside could attract capacity additions from rivals if pricing remains elevated for too long. That argues for favoring the tighter supply-name with immediate cash conversion over the more capital-intensive builder unless you can express the trade with defined risk.

Key Decisions for Investors

• Long WDC vs. short a basket of lower-quality storage/semicap names on a 3-6 month horizon: express the view that HDD shortage-driven pricing power is more durable than consensus expects; target 15-20% relative outperformance with tighter fundamental downside than outright long beta.
• Buy APLD only on pullbacks or after confirming another capacity milestone; use a 6-12 month horizon and treat it as a convex execution trade. Upside can be large if deployments stay on schedule, but miss risk is elevated because any delay pushes revenue recognition into 2027.
• Use call spreads on WDC rather than common stock to capture rerating while capping downside from a future supply response; 6-9 month tenor suits the lag between contract signings and reported margin expansion.
• If already long AI infrastructure, hedge with a short in more levered data-center buildouts/adjacent beneficiaries that lack contracted visibility; the trade is that the market is paying too much for duration without enough proof of cash conversion.
• Set a trigger to trim APLD into strength after major contract or construction headlines, because the stock can re-rate well before fundamentals fully inflect; the risk/reward improves materially after the first wave of optimism fades.