We recently published a list of 11 Best Data Storage Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Silicon Motion Technology Corp. (NASDAQ:SIMO) stands against other best data storage stocks to invest in according to analysts.

Data storage is defined as the organized preservation of digital information, which is vital for today’s computing and businesses. It ensures that data, which includes text, images, and videos, remains accessible and secure for future use. This involves storage systems that range from direct attached storage to cloud solutions. Each of these offers different levels of scalability and accessibility. Fortune Business Insights reported that the global data storage market was valued at $218.33 billion in 2024. It’s projected to reach $774.00 billion by 2032 at a 17.2% CAGR. This growth is expected to be driven by the increasing need for data storage solutions due to the rise of big data.

The data storage industry is undergoing a transformation that is primarily driven by the explosive growth of AI workloads. As the global data volume surges towards a projected 181 zettabytes by 2025, AI demands high levels of storage capacity and performance, according to Avnet Integrated Solutions. AI applications are generating and processing massive datasets. The median size of AI training datasets has seen exponential growth with immense storage requirements. This is fueled by AI-generated content and real-time analytics, both demanding rapid data access and processing.

This surge in data necessitates high-performance storage solutions, which pushes the industry towards SSD dominance. The speed and efficiency of SSDs make them ideal for AI’s demanding requirements. Key advancements in SSD technology, such as 3D NAND and QLC NAND, are driving increased storage densities and improved performance. Emerging standards like EDSFF E3 and PCIe Gen 6 are optimizing SSDs for AI server and data center applications, with a focus on performance, efficiency, and the growing field of Edge AI. While SSDs are gaining prominence for active AI processing, HDDs remain relevant for cost-effective, large-scale storage of archived data. Their cost per gigabyte makes them suitable for data archiving, backup, data lakes, and surveillance applications. Technological advancements like HAMR and MAMR are increasing HDD capacities.

SSD prices are expected to decline as production scales and technology improves, while HDD pricing faces potential plateaus due to the maturity of the technology and increased manufacturing costs. The rise of AI is undeniably accelerating the transition towards SSD-dominated storage solutions. While HDDs retain their value for specific applications, SSDs’ performance and efficiency make them the preferred choice for handling AI’s immense data demands. The data storage industry must adapt to this evolving landscape and prioritize high-performance storage solutions to support the ever-growing needs of AI applications.

Our Methodology

We sifted through ETFs and financial media reports to compile a list of the top data storage stocks. We then selected the 11 stocks with high analysts’ upside potential, at least 15%, as of March 28 and that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

An engineer in a lab coat tweaking a circuit board with intricate semiconductors.

Silicon Motion Technology Corp. (NASDAQ:SIMO)

Average Upside Potential as of March 28: 38.99%

Number of Hedge Fund Holders: 39

Silicon Motion Technology Corp. (NASDAQ:SIMO) designs and markets NAND flash controllers, which are essential components for solid-state storage across various applications. Its products power SSDs in PCs, data centers, mobile devices, and industrial applications. This enables efficient and reliable data storage solutions for a global customer base.

The company’s core growth driver is its data storage controller segment which specializes in NAND flash controllers for SSDs, eMMC, and UFS. In 2024, its SSD controller business expanded by 20%, which helped the company capture over 30% of the market. It has a leading position in high-performance PCIe 5 SSD controllers and is developing new models for 2026, alongside its strong presence in portable SSD controllers.

The company’s eMMC/UFS controller business saw a 70% revenue increase in 2024, which was driven by expansions into non-smartphone data storage applications. It has entered the enterprise SSD market with its Mount Titan platform, which has secured six customers and aims for 5% to 10% of total revenue by 2026-2027. This includes developing next-generation PCIe 6 controllers and high-density 128TB SSDs specifically for AI-driven data storage.

Focus Capital Management is optimistic about Silicon Motion Technology Corp. (NASDAQ:SIMO) due to its exceptional 2024 growth, expanding market share, and successful entry into new high-growth markets like AI and high-end PCs. It stated the following in its Q4 2024 investor letter:

“Silicon Motion Technology Corporation (NASDAQ:SIMO) designs and sells controllers which manage the NAND flash memory ubiquitous in modern computing. Wherever there is NAND flash, there must be a controller, often one from Silicon Motion. SIMO is an ADR (American Depository Receipt) trading on the NASDAQ.

2024 — Growth Across the Board: We just recently discussed at some length in our third quarter letter about Silicon Motion’s strengthening industry position, increasing market share, and growing revenue and margins. Over 2024, revenue has grown 25%+, gross margin has expanded 500 basis points, and net income has about doubled. We will not repeat our points from there at length. We will simply suffice with saying that the future looks even brighter, with continued growth in their core market segments as well as significant growth from their entry into new market segments. Silicon Motion’s entry into the high-end PC market with their PCIe 5.0 controllers is off to a very strong start with major design wins. In fact, Silicon Motion has stated that based on their present design win pipeline, they expect to attain about 50% market share in the high-end PC segment over the next few years, from their present standing start. And their MonTitan enterprise controllers for AI and data centers have already garnered multiple Tier 1 customer wins, with more expected to come, in what is again a greenfield opportunity for the company…” (Click here to read the full text)

Overall, SIMO ranks 8th on our list of best data storage stocks to invest in according to analysts. While we acknowledge the growth potential of SIMO, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SIMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.