The Artificial Intelligence (AI) Stock That Doesn't Need a Bull Market to Make You Money

Not every artificial intelligence (AI) stock needs a bull market to outpace the S&P 500. Sandisk (NASDAQ: SNDK) is in the middle of a generational run as its NAND flash memory chips gain momentum amid the AI build-out. The stock has had close to 4,000% in gains over the past year, and the fundamentals suggest that the rally can continue.

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Parabolic growth is fueled by insatiable demand

Sandisk's revenue growth is enough to get attention. Sales surged by 97% sequentially in its fiscal 2026 third quarter. Its $5.95 billion in revenue also represented 251% year-over-year growth, and guidance for its fiscal 2026 fourth quarter implies 34.5% sequential growth at the $8 billion midpoint.

These numbers are superb, but are they sustainable? That's the question many investors are asking, especially with how cycle-driven the memory chip industry is. Companies like Sandisk are significantly ramping up production because the demand is there. However, if demand ever slows down, Sandisk and other chipmakers will be left with inventory gluts that result in slower-moving products and lower profit margins. That won't be the case for multiple years.

Grand View Research projects a 30.6% compound annual growth rate (CAGR) for the AI industry through 2033, suggesting sustained momentum. Tech companies have also been reaching out to memory chip providers to invest in chip production lines to address supply shortages. Sandisk CEO David Goeckeler recently told investors that the NAND flash memory market will remain undersupplied at least through 2027.

Sandisk's customers have deep pockets

Investors may remember how chipmakers like Nvidia crashed a few years ago, when crypto mining business demand dried up.

"This is surely a setback and I wish we had seen it earlier," Nvidia CEO Jensen Huang said in a 2018 press call regarding slowing demand from crypto miners.

This is important for assessing Sandisk's long-term prospects because it reflects the cyclical nature of the industry. However, there are vast differences between then and now.

Crypto mining is unprofitable for most participants, and even with Bitcoin much higher now than it was in 2017 or 2018, an analyst recently bemoaned how the industry is no longer profitable due to the prolonged Bitcoin pullback.

Crypto miners aren't the companies driving the current boom. Hyperscalers like Amazon and Meta Platforms are leading the charge. These tech companies generate billions of dollars in profit every quarter and have some of the best balance sheets among existing companies.

All these customers are scrambling to buy more compute, chips, and other necessary resources to get a competitive edge in the AI race. These companies can continue to increase their spending even when the economy slows down, which gives Sandisk the green light to continue its rally during broad market downturns.

The memory chip industry is in a multi-year boom that can produce meaningful gains for patient investors. Sandisk is one of the leaders.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bitcoin, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.