Credo vs. Sandisk: Which Stock Is the Better Buy for 2027?

Artificial intelligence (AI) has sparked a massive wave of hardware spending, leaving investors with the difficult choice between a fast-growing high-speed connectivity supplier and a data storage provider. Credo Technology Group (NASDAQ:CRDO) or Sandisk (NASDAQ:SNDK) are two promising stocks to consider heading into a new year.

Credo Technology focuses on the plumbing of data centers, providing high-speed cables and chips that move information quickly between servers. Sandisk provides the actual storage components where that information lives. Both companies are critical to the current tech cycle, though they operate at different scales and valuation levels.

The case for Credo Technology Group

Credo Technology Group provides high-speed copper and optical interconnect products, including active electrical cables and retimers, for AI data-center connectivity. The company maintains direct engagements with over 20 blue chip clients, including partnerships with Microsoft and Oracle. Customer concentration adds a layer of risk to the business, as 90% of fiscal 2026 revenue came from the top 10 customers.

On a trailing-12-month (TTM) basis, revenue reached nearly $1.6 billion in the August fiscal quarter, representing a significant increase of roughly 165% over the prior year. The company reported a net income of roughly $538 million for the same period. This resulted in a net margin of approximately 34%, a sharp improvement from the previous year.

As of its August 2026 balance sheet, the company carries no debt. The current ratio is approximately 7.4x, indicating the company's ability to meet short-term obligations with assets that can be converted to cash within a year.

TTM free cash flow reached nearly $439 million. However, stock-based compensation accounted for roughly 39.3% of operating cash flow, inflating reported cash generation, since SBC is a non-cash expense added back in the cash flow statement.

The case for Sandisk

Sandisk designs and produces NAND flash storage products for various markets, including cloud infrastructure and edge systems. The company employs a strategy of long-term supply agreements to improve demand visibility and mitigate the cyclicality of semiconductor stocks. Its customer base includes large cloud providers, consumer electronics makers, and retail shoppers.

TTM revenue reached approximately $29 billion in the October fiscal quarter, representing a roughly 272% increase over the prior fiscal period. The company recorded a net income of nearly $19 billion. This reflects a net margin of approximately 67% during the same fiscal year.

According to its October 2026 balance sheet, the company carries no debt. Its current ratio was approximately 2.6x, suggesting the company maintains a solid buffer to cover its near-term liabilities.

TTM free cash flow for the period was close to $17 billion, representing the cash remaining after the company covers its operating expenses and capital investments.

Risk profile comparison

Credo faces significant revenue concentration, as a small number of customers account for a substantial share of sales. Competitive threats are intense from firms Marvell Technology and Astera Labs.

Sandisk is highly dependent on its Flash Ventures partnership with Kioxia for developing and manufacturing memory products. It faces fierce global competition from Samsung Electronics, SK Hynix, and Micron Technology. The company also faces financial risks linked to its recent spin-off from Western Digital, including potential tax liabilities.

Valuation comparison

Sandisk trades at a lower Forward P/E, based on future earnings estimates, and P/S ratio, comparing market cap to sales over the past twelve months.

Valuation metrics include those sourced from Financial Modeling Prep (FMP) and may differ from those of other data providers.

Which stock would I buy for 2027?

For 2027, Sandisk has a better chance of outperforming. Supply in the memory and storage markets is extremely tight right now. With demand high, this is boosting selling prices and revenue for Sandisk.

Analysts currently expect Sandisk's adjusted earnings to reach $237 in fiscal 2027 (ending in June), up from $70.88 reported for fiscal 2026. Analysts expect another increase to $308 in fiscal 2028. For that high growth trajectory, the stock is trading at a low forward earnings multiple of about 5x on this year's consensus estimate.

Credo is also growing fast, with analysts anticipating revenue to grow about 70% annually over the next two years, and earnings to rise at a high rate of 286% annually. By fiscal 2028 (ending in April), analysts expect earnings to hit $10.05, up from $3.46 reported for fiscal 2026.

However, Credo's forward earnings multiple is higher at 21x as of Oct. 30, 2026. More growth is already priced in, which tilts the upside potential in Sandisk's favor.

The main risk for Sandisk is that supply catches up to demand, pressuring selling prices and growth, or AI spending slows down, causing demand to fall. Sandisk operates in an industry notorious for cyclical swings, making the stock tricky to value.

That said, if I'm choosing the stock with the higher upside potential over the next year, I would buy Sandisk right now.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology, Micron Technology, Microsoft, Oracle, and Western Digital. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.