Sandisk Stock Is Up 1,500% in the Past Year Due to AI -- Is It Still a Buy? Wall Street Has a Surprising Answer for Investors.

Semiconductor company Sandisk (NASDAQ: SNDK) is one of the hottest artificial intelligence (AI) trades on the market. The stock led the S&P 500 higher in 2025, its price increasing more than sixfold, and it has more than doubled in 2026. That brings the total return to 1,500% since the company was spun off from Western Digital last February.

Interestingly, Wall Street analysts generally see Sandisk as undervalued. As of Jan. 30, the stock trades at $576 per share.

• The highest target price of $1,000 per share implies 73% upside.
• The median target price of $690 per share implies 20% upside.
• The lowest target price of $235 per share implies 59% downside.

Importantly, many analysts raised their target prices after Sandisk delivered exceptional earnings results on Jan. 29. Prior to the report, the median target price had been $400 per share. So, Wall Street is having trouble keeping pace with this AI stock. Is it too late to buy?

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Sandisk is gaining market share in flash memory

Sandisk is a semiconductor company that designs and manufactures data storage solutions based on NAND flash technology for data centers and edge devices (e.g., automotive systems, personal computers, smartphones, gaming consoles). Its products include USB flash drives and solid state drives (SSDs) in external, internal, and embedded form factors.

Central to Sandisk's business is a joint venture with Japanese manufacturer Kioxia. Both companies realize cost efficiencies and supply chain security by sharing research and development (R&D) expenses and capital expenditures related to process technology (i.e., the multistep manufacturing process used to transform raw silicon into chips) and memory chip design.

Sandisk has another important advantage in vertical integration. The company not only manufactures memory wafers through its joint venture but also packages the wafers into chips and integrates the chips into final products, such as SSDs. That lets Sandisk optimize the performance and reliability of its storage devices in ways that most other suppliers cannot.

Sandisk is the fifth-largest player in the NAND flash memory market. But the company gained 2 percentage points of market share during the 12-month period that ended in September 2025, while industry leaders Samsung and SK Hynix lost market share. Sandisk is likely to maintain that momentum because several hyperscalers are testing its enterprise SSDs.

Sandisk is growing quickly due to a memory chip supply shortage

Demand for artificial intelligence (AI) infrastructure has led to an unprecedented supply shortage in memory chips needed to produce SSDs and DRAM (dynamic random access memory). "Prices for memory shot up 50% in the last quarter of 2025 and are projected to increase another 40% to 50% by the end of the first quarter of 2026," according to The Wall Street Journal.

Sandisk has been a major beneficiary. The company reported exceptional financial results in the second quarter of fiscal 2026 (ended Jan. 2). Revenue increased 61% to $3 billion on especially strong sales growth in the data center segment. Meanwhile, non-GAAP (generally accepted accounting principles) earnings increased 404% to $6.20 per diluted share.

Management's third-quarter guidance also beat Wall Street's estimates, calling for revenue of $4.6 billion and non-GAAP net income of $13.00 per diluted share at the midpoint. If that is accurate, earnings will more than double versus the prior quarter. "We continue to see customer demand well above supply beyond calendar year 2026," CEO David Goeckeler told analysts.

Sandisk stock trades at a reasonable valuation, but the chip industry is cyclical

Wall Street estimates Sandisk's adjusted earnings will grow at 156% annually through the fiscal year ending in June 2027. That makes the current valuation of 80 times earnings look quite reasonable, which itself is an argument for buying the stock.

However, this situation is complicated because semiconductor sales tend to be cyclical, meaning the market oscillates between supply shortages and supply gluts. At some point, the market will probably afford Sandisk a much lower price-to-earnings multiple because investors will anticipate that shift.

Therein lies the danger. It is impossible to predict when the market will look beyond the supply shortage -- it may happen in the next few months, or it may not happen for more than a year -- but when that day comes, Sandisk shares could decline sharply. Investors who are comfortable with that risk can buy a small position.

Trevor Jennewine 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.