Why Sandisk (Not Micron) Could Be the Biggest Winner Of the AI Memory Era

The artificial intelligence (AI) memory boom has been kind to both Sandisk Corporation (NASDAQ: SNDK) and Micron Technology (NASDAQ: MU). Sandisk shares are up about 560% year to date, while Micron has risen more than 180%. Further, both companies recently posted quarterly results showing record revenue and significant margin expansion.

But the two sit in different corners of the memory market. Micron sells the high-bandwidth memory (HBM) that pairs with Nvidia's most expensive AI chips, along with conventional memory (DRAM) and storage chips (NAND). Sandisk, only recently separated from Western Digital, focuses entirely on NAND flash -- the storage that holds the data feeding those AI models.

So, which is the better buy? Even with similar tailwinds for both companies, the gap between the two could be wider than it appears.

Image source: Getty Images.

Sandisk: reshaping the NAND business

Sandisk's fiscal third quarter of 2026 (the period ended April 3, 2026) was extraordinary. The flash storage company's revenue rocketed to $5.95 billion -- up 97% sequentially and 251% year over year. Non-GAAP (adjusted) gross margin expanded to 78.4%, from 51.1% in fiscal Q2 and just 22.7% a year earlier. And adjusted earnings per share of $23.41 came in far ahead of management's own guidance range of $12 to $14.

Notably, the company's data center end market grew 233% sequentially to roughly $1.5 billion, lifting it to about a quarter of total revenue.

Further, Sandisk is using this moment to reshape its business. Management has been signing multi-year supply agreements with hyperscale customers, backed by firm financial guarantees.

"Five signed agreements to date, over $11 billion in financial guarantees, and over a third of our bits in fiscal year 2027 under firm customer commitments represent a fundamental reshaping of our business, providing visibility, pricing protection, and more consistent, durable returns," CEO David Goeckeler said during Sandisk's fiscal third-quarter earnings call.

Three of those deals alone lock in approximately $42 billion in contractual revenue.

Further, the company is surprisingly debt-free, ending fiscal Q3 with $3.7 billion in cash. And it just authorized its first stand-alone share buyback -- a $6 billion program.

The icing on the cake? Fiscal fourth-quarter guidance calls for adjusted earnings per share of $30 to $33. Pretty impressive quarterly earnings per share for a company with a stock price of $1,580 as of this writing.

Micron: DRAM strength meets a heavy build-out

Micron's fiscal second quarter of 2026 (the period ended Feb. 26, 2026), reported in March, was remarkable in its own right. Revenue jumped 75% sequentially and 196% year over year to $23.86 billion, with adjusted earnings per share of $12.20. DRAM accounted for roughly 79% of revenue, fueled by surging demand for HBM tied to Nvidia's Blackwell platform and the upcoming Vera Rubin generation. And management has already committed essentially all of its calendar 2026 HBM supply.

But capital allocation looks more capital-intensive for Micron. The company now expects fiscal 2026 capital expenditures to top $25 billion, up from a prior $20 billion plan. And management has signaled that construction-related spending alone could rise by more than $10 billion year over year in fiscal 2027 as new fabs ramp in the U.S. and Asia. Sure, a recently announced 30% dividend increase is welcome, but the resulting dividend yield remains minuscule.

That heavy spending could pay off handsomely if AI demand stays robust. But it also locks the company into a higher fixed-cost base just as new industry capacity is being added.

The better buy

Comparing the two, Sandisk looks like the more compelling pick in my opinion. Its combination of multi-year contracts and a debt-free balance sheet gives it more cycle protection than Micron's aggressive spending strategy. And the $6 billion buyback compares favorably to Micron's small dividend. Finally, Sandisk's leverage to AI inference workloads, which keep pulling more enterprise SSD content into each rack, could also prove more durable than peak HBM pricing.

Of course, neither stock looks cheap on trailing earnings -- the price-to-earnings ratio sits near 53 for Sandisk and 38 for Micron. Though both look more reasonable on a forward basis, given each company's latest guidance.

And one final thought: Owning both isn't a bad call for investors who believe the AI memory cycle still has years to run. But investors should keep in mind that the memory market has been historically cyclical. So, both stocks could fall sharply if supply eventually catches up with demand. For that reason, these are arguably high-risk stocks, and a position in either should probably be kept small.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology, Nvidia, and Western Digital. The Motley Fool has a disclosure policy.