Should You Skip Micron for This AI Chip Stock Instead?

Artificial intelligence (AI) demand has shown little sign of slowing despite rising concerns around the sustainability of massive AI infrastructure spending.

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Micron Technology has been one of the biggest beneficiaries of this trend. Shares of this memory player have soared by more than 810% in the past year. The company's revenue was up 196% year over year to $23.9 billion, while gross margin surged 18 percentage points sequentially to a record 75% in the second quarter of fiscal 2026 (ending Feb. 26, 2026).

Micron's high-bandwidth memory (HBM) chips are becoming increasingly important for Nvidia's Blackwell and Rubin AI platforms. The company recently announced volume shipments of HBM4 for Nvidia's Rubin systems. Micron also expects both DRAM and NAND supply conditions to remain tight beyond 2026.

However, another semiconductor company may be benefiting from a different part of the AI infrastructure build-out. That company is Sandisk (NASDAQ: SNDK), which focuses on storage infrastructure.

AI demand is creating a huge storage opportunity

Growing adoption of AI systems is increasing the amount of data processed by AI models, including larger prompts, longer conversations, more complex reasoning, and increasingly autonomous AI agents. AI systems also require large amounts of low-latency flash storage to quickly retrieve information and generate real-time responses at scale. This, in turn, is increasing the amount of data that must be stored and processed, driving demand for storage infrastructure.

NAND flash is becoming a critical part of AI infrastructure because it provides the storage capacity and efficiency needed to run AI systems at scale. Sandisk is increasingly benefiting from rising demand for enterprise solid-state drives (SSDs) and NAND flash storage used in AI inference systems (running AI models in production environments), vector databases (AI-driven real-time data retrieval systems), and agentic AI workloads. Management expects AI-powered demand to reshape NAND demand and make the storage business less cyclical over time.

Sandisk's recent earnings results have demonstrated the rapid pace of this demand. The company's revenues soared 251% year-over-year to $5.9 billion, while non-GAAP earnings per share (EPS) jumped almost 277% sequentially to $23.4 in the third quarter of fiscal 2026 (ending April 3, 2026). The data center business has become a key growth catalyst, with revenues rising 233% sequentially to $1.47 billion in the third quarter.

Multiyear contracts

Historically, memory and storage companies have been highly cyclical businesses. During periods of strong demand, manufacturers typically expand production aggressively. However, as supply soars, prices fall, and profits decline sharply.

However, Sandisk's business appears to be operating under a more resilient business model now. The company has already signed five multiyear supply agreements with customers that include committed purchase volumes and financial guarantees. The longest among these agreements extends up to five years.

Of these, the three agreements signed in the third quarter alone represented roughly $42 billion in minimum contractual revenue commitments. The five agreements together include more than $11 billion in financial guarantees backed by prepayments and third-party financial arrangements. Management also stated that more than one-third of fiscal 2027 production capacity is already covered under these agreements, with that percentage potentially rising above 50% over time. Hence, Sandisk now has better visibility into future demand and pricing.

Sandisk offers a different AI opportunity from Micron

Analysts expect Micron's revenue to grow around 192% year over year to roughly $109 billion and adjusted EPS to rise by almost 601% year over year to $58.1 in fiscal 2026 (ending Aug. 2026). Sandisk's revenues are expected to grow nearly 164% year over year to $19.4 billion, while adjusted EPS is projected to rise around 2058% year over year to $64.5. Hence, SanDisk's smaller size and faster projected earnings growth could give it more room for higher share-price gains than the much larger Micron.

Sandisk's business mix is also witnessing a favorable shift toward higher-margin enterprise SSD products. Enterprise SSDs accounted for roughly 25% of the company's portfolio in the third quarter, driven by strong demand for its TLC-based enterprise SSD products (high-performance storage drives used in data centers and AI systems). That mix is expected to further improve as Sandisk begins revenue shipments of its QLC Stargate solutions (next-generation high-capacity cost-efficient storage products designed for data centers) in the fourth quarter.

Sandisk is also strengthening supply chain resilience to support long-term growth. The company has extended its long-standing NAND manufacturing joint venture with Kioxia, previously set to expire in 2029, through 2034. The company has also invested around $1 billion in Taiwanese DRAM manufacturer Nanya Technology to secure the DRAM supply needed for its enterprise SSD business. Hence, Sandisk is positioning itself for a larger role in AI infrastructure beyond benefiting from a short-term NAND up cycle.

Sandisk's stock has already gained more than 4,000% in the past year, yet expectations remain high. The company also faces risks associated with a slowdown in AI spending or a weakening in NAND pricing. However, if AI infrastructure spending continues to shift toward storage-heavy inference workloads, Sandisk's stock can continue to soar in the coming months.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.