Sandisk Unveiled an $14 Billion Buyback and Warren Buffett Has Something to Say About It

In February 2025, Sandisk (NASDAQ: SNDK) was spun off from Western Digital and became an independent company. Since the split, a vertical share price has been the default for Sandisk investors. So far in 2026, Sandisk stock has rocketed 548% -- making it the top-performing stock in the Nasdaq-100. Shares are rallying hard on exploding demand for NAND flash memory in data center solid-state drives (SSDs).

Right in the middle of its historic run, Sandisk's management authorized a $14 billion stock buyback in conjunction with its fiscal fourth-quarter earnings report. I'll admit, buying a stock after such a parabolic rise looks odd at first glance. But with the help of Warren Buffett, smart investors can determine whether this share repurchase is a smart idea.

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Why Warren Buffett loves stock buybacks

For decades, Buffett said that when a company can buy its own stock at below the value of the underlying business, that is often a great use of cash. The idea is simple: Shrink the share count so existing investors start owning more of the profits.

Apple is a prime example. The iPhone maker is one of Berkshire Hathaway's signature holdings, and Buffett has repeatedly praised the way former Apple CEO Tim Cook chose to repurchase stock consistently. This was lucrative for Berkshire because as the share count fell, the firm's slice of Apple's earnings grew, even if the investment conglomerate didn't buy more shares.

Buffett's argument is that if management can pay less than intrinsic value during buybacks, the remaining shares inherently become more valuable. If management overpays, however, it diminishes value creation for shareholders.

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Does it make sense for Sandisk to buy back stock?

If you analyze Sandisk stock solely on its percentage gains, you may think the buyback is foolish. Remember, Buffett would shrug at the stock chart. Instead, the Oracle of Omaha would ask whether Sandisk's business is worth more than the price being paid under the repurchase program.

Sandisk's Q4 numbers were not modest. Revenue reached nearly $9 billion, up 372% year over year. The company's data center business is increasingly becoming a larger portion of sales, growing 437% year over year and comprising nearly one-quarter of Sandisk's total business now. Thanks to the artificial intelligence (AI) boom, Sandisk is able to command lucrative pricing power for its NAND solutions, which carry gross margins in the mid-80s percentage profile.

To me, the buyback signals that Sandisk's management thinks the cash the company will be able to throw off exceeds what the market is capitalizing today. Fewer shares will make earnings per share (EPS) appear to grow faster than the underlying business. That can bring in a new cohort of buyers who fixate more on earnings-per-share growth than they do on a NAND story.

Is Sandisk stock a buy right now?

Memory names have a nasty habit of being cyclical. What looks different this time is the combination of multiyear contracts, the pace of hyperscaler capex, and Nvidia doing whatever it takes to secure extra memory.

In my eyes, Sandisk's buyback authorization is a signal that management believes the stock sits under the value of the franchise. Management's conviction, in combination with the company's secular tailwinds, makes Sandisk stock a compelling name to own outside of the usual AI semiconductor stocks.

Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Nvidia, and Western Digital. The Motley Fool has a disclosure policy.