Hidden AI Gems in S&P 500 Beating Nvidia – Buy Before Earnings!

As the S&P 500 continues its remarkable climb toward new highs, investors are increasingly drawn to the SPY stock, the popular ETF that tracks the index’s performance. With the broader market up about 13% year-to-date, the spotlight has shone brightly on artificial intelligence (AI) leaders like Nvidia (NVDA), whose explosive growth has propelled the SP 500 to unprecedented levels. Nvidia’s shares have surged roughly 30% in 2025 alone, fueled by insatiable demand for its AI chips. Yet, beneath the headlines, a handful of lesser-known AI-linked companies within the S&P 500 are not just keeping pace—they’re leaving Nvidia in the dust.

These “hidden gems” are capitalizing on the AI boom in niche ways, from powering data storage to optimizing software platforms. With third-quarter earnings season in full swing, many of these stocks are poised for potential catalysts that could drive even more gains. For savvy investors eyeing S&P 500 stocks, now could be the perfect time to consider adding these outperformers to your portfolio before their reports hit the wires. Let’s dive into three standout picks that have beaten Nvidia’s returns this year, why they’re thriving, and what to watch in the coming weeks.

Why These AI Plays Are Outshining the Giant

Nvidia’s dominance in AI hardware is undeniable, but the ecosystem supporting it—from data storage to specialized software—is equally vital and often overlooked. As AI models grow larger and more complex, the need for efficient storage, analytics tools, and backend infrastructure has skyrocketed. According to recent market analyses, AI-related spending is expected to contribute trillions to global GDP by 2030, creating ripple effects across the S&P 500.

This year, while Nvidia has delivered solid but tempered gains compared to its prior years’ triple-digit surges, these under-the-radar names have posted returns exceeding 150% in some cases. Their success stems from direct ties to AI’s foundational needs: massive data handling and processing. Importantly, many trade at more reasonable valuations than Nvidia’s lofty multiples, offering a buffer against any market pullbacks in the SPY.

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Gem #1: Western Digital (WDC)—The Storage Powerhouse Fueling AI Data Centers

At the top of the S&P 500’s performance leaderboard for 2025 sits Western Digital, a company best known for everyday hard drives but quietly revolutionizing AI infrastructure. Shares have rocketed 176% year-to-date, far outpacing Nvidia’s 30% rise and the S&P 500’s modest gains. With a market cap now over $42 billion, Western Digital’s surge is no fluke—it’s riding the wave of exploding demand for high-capacity storage in AI data centers.

AI training requires petabytes of data, and Western Digital’s specialized drives are essential for hyperscalers like Microsoft and Amazon to store and access it efficiently. The company’s fiscal fourth-quarter results, reported earlier this month, highlighted a 25% revenue jump, driven by AI-optimized products. Analysts project continued double-digit growth into 2026, as data center expansions accelerate.

Western Digital’s next earnings report is slated for late October, just days away. Investors should watch for updates on AI-specific sales, which now account for over 40% of revenue. Trading at around 15 times forward earnings— a steal compared to Nvidia’s 50-plus multiple—this S&P 500 stock offers compelling value. If guidance exceeds expectations, it could easily add another 20-30% to its run, making it a must-buy for SPY holders seeking diversification.

Gem #2: Seagate Technology (STX) – The Unsung Hero of AI Data Hoarding

Hot on Western Digital’s heels is Seagate Technology, another “boring” storage specialist that’s anything but dull in the AI era. Up an astonishing 155% in 2025, Seagate’s performance has handily beaten Nvidia, pushing its market cap to $47 billion. Like its peer, Seagate thrives on the backend of AI: its enterprise-grade hard drives and solid-state solutions are critical for the massive datasets powering machine learning.

The company’s pivot toward AI has been masterful. In its latest quarterly update, Seagate reported a 30% increase in data center revenue, attributing it to partnerships with cloud giants building out AI infrastructure. This isn’t hype—global AI storage demand is forecasted to grow at 40% annually through 2028, per industry reports.

Seagate’s fiscal first-quarter earnings for 2026 (covering August-October 2025) are due in early November, providing a timely window for upside. Key metrics to watch include margins on AI-focused products and any new contracts announced. At a forward P/E of just 12, Seagate remains undervalued relative to its growth trajectory. For investors in S&P 500 stocks, this gem adds resilience to a portfolio heavy on flashy chipmakers like Nvidia.

Gem #3: AppLovin (APP)—The AI-Driven Ad Tech Disruptor

Shifting from hardware to software, AppLovin rounds out our list as a freshly minted S&P 500 member that’s exploding onto the scene. Since joining the index earlier this year, its shares have climbed over 120%—outstripping Nvidia—thanks to its AI-powered advertising platform that helps mobile app developers monetize with precision. Now with a market cap exceeding $30 billion, AppLovin’s “hidden” status is fading fast, but it’s still underappreciated compared to pure-play AI hardware names.

AppLovin’s secret sauce is its Axon 2.0 engine, an AI tool that uses machine learning to optimize ad placements in real-time, boosting revenue for clients like game studios. Third-quarter results showed a 45% year-over-year revenue spike, with AI contributing to higher user engagement. As mobile AI apps proliferate, AppLovin’s ecosystem is positioned for exponential scaling.

Earnings are set for November 7, making it a prime “buy before” candidate. Analysts anticipate 35% earnings growth, with potential for upward revisions if AI ad spend accelerates. Valued at 37 times sales, it’s pricier than the storage duo but justified by its 50%+ projected growth rate. This S&P 500 newcomer could supercharge SPY returns for those betting on AI’s software side.

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Risks and the Road Ahead for S&P 500 Investors

While these gems shine bright, no investment is without hurdles. The AI sector faces headwinds like potential U.S.-China trade tensions affecting supply chains and rising energy costs for data centers. Broader S&P 500 volatility—tied to Fed rate decisions—could also pressure SPY in the short term. That said, with Q3 earnings poised to validate AI’s momentum (projected 8% growth for the index), these stocks’ catalysts align perfectly.

Final Thoughts: Position Your Portfolio for AI’s Next Chapter

Nvidia remains a cornerstone of the S&P 500’s AI narrative, but diversification into these outperforming hidden gems—Western Digital, Seagate, and AppLovin—could unlock superior returns. As earnings unfold over the next two weeks, positive surprises here could propel shares even higher, benefiting SPY holders and individual stock pickers alike. For long-term investors, buying now means capturing growth at reasonable prices before the market fully catches on.

Disclosure: This article is for informational purposes only and not investment advice. Always consult a financial advisor. Stock performance data as of October 29, 2025.