Western Digital vs. Sandisk: The Better Way to Play the Hard-Drive Side of the AI Storage Boom

Two leading storage and memory companies that are experiencing phenomenal share price growth right now are Western Digital (NASDAQ: WDC), rising 288% over the past 12 months, and Sandisk (NASDAQ: SNDK), soaring more than 1,400% over the same timeframe. Investors can thank the boom in artificial intelligence (AI) infrastructure spending, which has accelerated demand for hard drives and memory.

But where are these companies headed next, and which one is the better AI play? If you're looking for a company focused purely on hard drive storage, then Western Digital is the smart play. But if you want to benefit from the broader AI memory boom, Sandisk is a great choice. Here's why.

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Western Digital: A more conservative AI data storage play

Western Digital and rival Seagate together hold an estimated 85% of the market of the hard disk drive (HDD) market. And the company's fourth-quarter fiscal 2026 results show just how well Western Digital's position is paying off, with sales rising 44% to $3.8 billion and non-GAAP (generally accepted accounting principles) earnings more than doubling to $3.56 per share.

Storage demand is so high that Western Digital can charge far more for its products than before. Gross margins accelerated in the fourth quarter to more than 54% -- up 13 percentage points from the year-ago quarter. That's especially important for potential investors because Western Digital's margins tend to increase more conservatively than those of Sandisk's, as hard drives are less prone to boom-and-bust cycles than flash memory.

Margins are rising as AI data centers fuel intense demand for storage, and Western Digital believes more is on the way, with data lake volume (raw data from enterprises) expected to increase by 25% or more over the next three years.

Management said first-quarter non-GAAP gross margins will be about 55.5% and sales will increase about 45% to $4.1 billion, at the midpoint of guidance. Non-GAAP earnings are expected to more than double again, to about $4 per share.

Sandisk: A riskier AI memory play

Most of Sandisk's business is focused on NAND flash memory and enterprise data center storage. NAND memory has become critical for AI data centers, and companies haven't been able to get enough of it over the past several years, leading to soaring gross margins for Sandisk.

Sandisk's gross margins were nearly 85% in the fiscal fourth quarter of 2026, an astonishing 58-percentage-point increase from the year-ago quarter.

Such rapid margin expansion helped push the company's non-GAAP earnings per share to $39.25 -- up from $0.29 per share in the year-ago quarter. Sales have also risen quickly, jumping 372% to $8.9 billion in the quarter.

And the good times likely aren't over yet. Sandisk CFO Luis Visoso estimates the NAND memory market will surpass $300 billion this year and "will approach $500 billion in revenue in calendar year 2027."

Management is guiding for impressive growth in the first quarter too, with sales expected to increase 453% to about $10.5 billion and non-GAAP earnings to jump to $45 per share, both at the midpoint. Meanwhile, gross margins will be in the range between 83% and 85%.

Sandisk has the slight edge, but both benefit from AI

Sandisk and Western Digital are both benefiting from a surge in AI demand, but NAND memory prices tend to have more boom-and-bust cycles than hard drive storage prices. This means that if there's an abrupt collapse in demand for NAND memory, Sandisk's gross margins could decline quickly.

There's a lot of debate right now about whether the AI boom is different from past demand cycles. I tend to think there are at least several more years of significant data center infrastructure spending that could fuel Sandisk's sales.

Recent estimates show that global AI data center infrastructure capital expenditures could reach $7 trillion by 2030. That's just an estimate, of course, but AI is clearly transforming every tech and software business right now and will continue to do so for many more years. That's going to take a lot of physical hardware to meet this new demand.

If that spending continues, the potential returns for Sandisk and its high-margin NAND flash memory business could be higher than for Western Digital's hard drive business. I think that gives Sandisk the edge over Western Digital right now.

But if you tend to be a little more conservative in your tech investments and are looking for a pure hard drive play, Western Digital is still a great stock to own, too.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool has a disclosure policy.