Up 1,250% in 1 Year, Is Sandisk the Best AI Stock to Invest in Right Now?

Sandisk (NASDAQ: SNDK) began its second stint as a public company when Western Digital spun it off in February 2025 -- and it has gotten off to a good start, to say the least. Over the past 12 months (ending Feb. 19), Sandisk's stock is up 1,250%, making it the best-performing S&P 500 component over that span.

Like many other tech companies, Sandisk's recent success comes down to one thing: artificial intelligence (AI). That surging business has given Sandisk a boost that I'm sure few would've anticipated just a few years ago. With the hot streak Sandisk is on, could it be the best AI stock to invest in right now?

Image source: Getty Images.

Why is Sandisk's stock surging?

A large part of training AI models involves storing and rapidly accessing large amounts of data (and I do mean large). That's where Sandisk comes into the picture. It makes high-speed digital storage devices that many megacap tech companies rely on in their data centers.

With data center buildouts proceeding at a torrid pace, demand for these specific storage devices has also increased. Unfortunately for the companies that need to buy them, demand exceeds the manufacturers' abilities to supply them. Fortunately for Sandisk, this shortage has allowed it to considerably raise its prices, widen its margins, and increase free cash flow.

In its fiscal 2026 second quarter (which ended Jan. 2), Sandisk's gross margin was 51.1% (up from 29.9% in the fiscal first quarter), and its adjusted free cash flow was $843 million (up from $448 million in the quarter before).

A short-term tailwind

Sandisk has put up impressive business results in recent quarters, no doubt. However, I don't consider it the best AI stock to own right now. Sandisk is in the right business at the right time, with the opportunity to capitalize on AI demand and a shortage of its hardware.

However, this memory shortage -- and therefore a lot of Sandisk's pricing power -- won't last. Sandisk's competitors, like Micron and Samsung, are ramping up production, which is likely to bring down prices and cut into Sandisk's current margins.

This isn't to say that Sandisk's stock won't continue rising (it's up 125% so far in 2026 alone). However, there's now relatively limited upside compared to the potential downside that could accompany a shift in the marketplace as undersupply transitions to oversupply.

A better choice for investors now would be to go with a company that has its hands in multiple areas of the AI supply chain, like some of the "Magnificent Seven."

Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Western Digital. The Motley Fool has a disclosure policy.