Why Sandisk Stock Rocked the Market Last Month

September was a good month to be in the computer memory business. That, plus several company-specific developments, powered Sandisk (NASDAQ:SNDK) stock to a double-digit gain in the first month of Fall. Its equity rose by over 11% during the period.

Thanks for the memory

Like other tech hardware makers, Sandisk stock had its stumbles at the start of the month. Investors had grown increasingly wary of companies associated with the build-out of artificial intelligence (AI), questioning their often-lofty valuations and prices. Such doubts arose after key figures in AI development, particularly Anthropic CEO Dario Amodei, called for a slowdown in the development of advanced models to ensure greater security.

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That sentiment changed sharply in mid-September, with no less a figure than Intel (NASDAQ:INTC) CEO Lip-Bu Tan. He warned that the current memory shortage, already significant due largely to the increased resource needs of AI, could be exacerbated next year and persist until 2028. That implies prices rising higher, which, of course, would benefit Sandisk and its peers.

Influential market professionals agreed. Analysts at Citigroup (NYSE:C) echoed a similar view in a research note they published around the same time. In their view, the shortage will be quite long-lasting; they predict it'll only end in 2031.

Citigroup wasn't the only researcher with an eye on Sandisk. On Sept. 22, Rosenblatt initiated coverage of the company's stock with a buy recommendation and a price target of $2,400. Analyst Kevin Cassidy's key argument, according to reports, is that Sandisk's wares are moving from commodity products into the realm of mission-critical AI hardware.

Another bullish boost came from Cassidy's peer, Mizuho prognosticator Vijay Rakesh. In a new note on the tech hardware space, the analyst flagged seven prime stocks to buy. Sandisk was one of them, along with custom chip specialist Broadcom (NASDAQ:AVGO), PC maker Dell (NYSE:DELL) , and others.

Sandisk also saw a lift when it was tapped to be a component stock of the S&P 100 index. While this large-cap indicator isn't as influential or closely monitored as the benchmark S&P 500 index from the same company (S&P Global (NYSE:SPGI)), it still makes the company a prime target for the many index-tracking funds on the scene these days.

Not a flash in the pan

I would agree with these recent, and rather optimistic, evaluations. Given how feverish the AI build-out is at the moment (and likely to remain for some time), there aren't many memory producers that can reliably supply it. Sandisk isn't only that, it's also a longtime go-to in the flash memory segment, so it's beautifully positioned to benefit from the AI revolution even if it only stands still. Yes, it's expensive in terms of price and valuation, but I think the former, in particular, can easily continue to go higher.

Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom, Intel, and S&P Global. The Motley Fool has a disclosure policy.