Is This AI Winner Still a Buy After a 500% Run?

When you think "AI winner," major artificial intelligence (AI) stocks like Nvidia or Microsoft may first come to mind. Yet while these companies may be benefiting the most from the generative AI growth trend, there's a stock that has delivered far greater returns year to date, thanks to AI-related tailwinds: SanDisk Corporation (NASDAQ: SNDK).

The two "Magnificent Seven" companies have generated high double-digit gains during this time frame. Not too shabby, but these gains pale in comparison to those of SanDisk. Since its spinoff from Western Digital finalized earlier this year, shares in this memory chip company have surged from $36 to $220 per share, or by more than sixfold.

Even as shares have pulled back, and concerns about a possible "AI bubble" have led to greater uncertainty among AI stocks across the board, don't assume you have missed the boat here with SanDisk shares.

Image source: Getty Images.

SanDisk has surged on strong NAND demand

SanDisk's 2025 surge may be even more impressive, when you consider that most of these gains have accrued since September. As recently as June, the stock was trading for not much more than its post-spinoff debut price.

At first glance, you may think this rally was the result of SanDisk becoming one of the meme stocks. However, rather than being driven by "meme mania," shares have surged thanks to improvements in the company's fundamentals. First, starting in September, the forward-looking stock market began pricing in the prospect of surging demand for NAND flash memory chips from AI hyperscalers.

With this increased demand not adequately met with a similarly sized increase in supply, NAND suppliers like SanDisk entered the catbird's seat, with the power to raise prices. The payoff from this favorable trend became more crystal clear earlier this month, when SanDisk released results for the quarter ending Oct. 3, 2025.

Revenue was up 23% year over year, and up 21% on a quarter-over-quarter basis. Although earnings per share (EPS) fell 33% year over year, it was up by more than fourfold on a sequential basis. More importantly, SanDisk beat sell-side analyst earnings estimates, and provided updates to guidance that vastly exceeded expectations.

Despite the recent sell-off, don't rule out a 2026 rally

For the current quarter, SanDisk's management expects the company to report revenue of between $2.55 billion and $2.65 billion, with non-GAAP EPS coming in at between $3 and $3.40. Taking the midpoints of these ranges, or $2.6 billion in revenue, and non-GAAP EPS of $3.20, we get anticipated sequential revenue and earnings growth of 12.6% and 162.3%, respectively.

Looking further into the future, Wall Street analysts now estimate SanDisk could report EPS of $12.81 during the fiscal year ending June 2026, and $20.21 during the fiscal year ending June 2027.

However, as seen from the stock's current forward valuation, there is a high level of uncertainty regarding these projections. Even after its bull run, SanDisk trades for only 17 times forward earnings. For comparison, Nvidia is trading at a forward price to earnings ratio of 23, while other AI chip stocks sport even higher forward valuations.

Still, favorable demand trends could indeed continue well into the coming year. As Morgan Stanley analyst Joseph Moore recently argued in a bullish research note on memory chip stocks, memory chip capacity is likely several quarters away from expanding to the point that it's meeting demand. In turn, not only could SanDisk live up to current earnings forecasts, as Moore put it, there is "the potential for multiple upward revisions over the next few quarters." If this happens, the SanDisk rally is likely to continue.

Is SanDisk a buy today?

With a few more "beat and raise" quarters under its belt, investors could bid up SanDisk to even loftier prices. For instance, if the company lives up to FY27 forecast, even without further valuation expansion, this stock could reach prices well over 50% above present price levels.

Don't rule out the potential for other catalysts to emerge as well. For example, as Wedbush analyst Dan Ives argued back in October, SanDisk could be a top takeover target among AI-related stocks.

Also, the stock's recent addition to the S&P 500 index could help sustain support for shares. With these factors in mind, you may want to consider buying the dip with SanDisk, especially if it carries on between now and the next quarterly earnings release, set to occur next February.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.