Sandisk Stock Is Up 695% in 2026 and This Market Indicator Predicted It. Here’s What It Says About 2027.

Last year, semiconductor company Sandisk (NASDAQ:SNDK) was the best-performing stock in the S&P 500 (SNPINDEX:^GSPC). Historically, stocks that have claimed that title have often recorded strong returns in the following year.

Indeed, Sandisk shares have advanced 695% in 2026, as the company has benefited from insatiable demand for memory chips fueled by artificial intelligence boom. Here's what investors should know.

Image source: Getty Images.

The best-performing S&P 500 stock in any given year generally posts big gains in the next year

Famous investor Peter Lynch once warned, "Selling your winners and holding your losers is like cutting the flowers and watering the weeds." Another way to think about Lynch's advice is that great stocks -- stakes in quality businesses purchased at reasonable prices -- can compound wealth over long periods.

So, rather than selling a stock simply because its price has dropped, investors should focus on whether the underlying business can still create value for shareholders. Selling would be nonsensical if the investment thesis remains intact. Winners tend to keep on winning.

That observation helps explain why stocks that perform well in one calendar year often do well in the next. The chart below lists the best-performing S&P 500 stocks in each of the last 10 years, and it shows how they performed the following year.

Data source: YCharts. The asterisk indicates that Sandisk's return is subject to change because 2026 has not ended.

As shown above, the best-performing S&P 500 stock in each calendar year over the past decade has gained a median of 91% in the following year. By comparison, the S&P 500 achieved a median annual return of 18% over the same 10-year period.

So, readers should ask themselves which stock is leading the S&P 500 in 2026, as history says it's likely to deliver robust returns in 2027. The answer is Sandisk.

Of course, the rankings could change in the remaining months of 2026, and investors should never rely too heavily on any single stock market indicator. How Sandisk actually performs next year will depend on its financial results and market sentiment, both of which are tied to the artificial intelligence (AI) boom.

Sandisk trades at a reasonable price, but the cyclical nature of the memory chip industry makes the stock risky

Sandisk is a semiconductor company that develops NAND flash memory chips and data storage products. Its portfolio includes solid-state drives (SSDs) for computers, gaming consoles, and industrial systems, and enterprise SSDs that power AI workloads in data centers.

Sandisk does not have a particularly strong competitive position. The company is the fifth-largest NAND supplier by revenue, and it did not gain market share over the past year. Yet, Sandisk has delivered a series of impressive financial reports -- revenue increased 372% in the fourth quarter -- driven by a cyclical uptick in memory prices.

To elaborate, memory chips are considered commodities because products from different suppliers are generally interchangeable. Consequently, suppliers compete on price rather than performance. In the past, the industry has cycled between demand booms that drive prices up and supply gluts that drive prices down.

We are currently in a cyclical upswing, meaning excess demand is driving prices higher. In fact, NAND flash memory prices have doubled during the past year, as the rapid build-out of AI infrastructure has created insatiable demand for data center storage products.

Wall Street expects Sandisk's adjusted earnings to increase at 29% annually through 2030. That makes the current valuation of 27 times adjusted earnings look sensible. But investors need to be cautious. If the current memory chip supply shortage is resolved more quickly than expected, Sandisk stock could drop sharply as forward earnings estimates fall.

Trevor Jennewine has positions in Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, NRG Energy, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.