Sandisk Could Be a Generational Buy at These Levels

Sandisk (NASDAQ: SNDK) has been quite the stock in 2026. It rose nearly 900% from the start of the year to the end of June, but it has given up around half of those gains in the weeks since, which I think presents an incredible buying opportunity.

Few stocks have the upside potential that Sandisk has, and at any moment, a rally could send it back toward its all-time high.

Image source: The Motley Fool.

The memory chip market will stay supply-constrained for years

Sandisk makes NAND memory chips, which are utilized for long-term data storage. The biggest use case for NAND memory is in solid-state drives, which are being deployed in huge quantities in data centers. Demand for NAND memory far exceeds supply, and because memory is a fairly commoditized industry with just a few major suppliers, the prices of all of their wares continue to rise.

The shortage and the resultant price surge were major factors in Sandisk's results for its fiscal 2026 fourth quarter (which ended July 3): One-third of its revenue growth in the period came from increased sales volumes, and two-thirds came from higher pricing. Altogether, Sandisk's revenue surged by 372% in its fiscal Q4.

SNDK Revenue (Quarterly YoY Growth) data by YCharts.

Wall Street analysts expect a similar performance for Q1 fiscal 2027 -- revenue is forecast to rise over 360% year over year. However, throughout fiscal 2027, the company's top-line growth is expected to moderate, with 140% revenue growth expected. That's still quite impressive, and it isn't really being priced into the stock at all.

Sandisk trades now for just 5.8 times expected forward earnings.

SNDK PE Ratio (Forward) data by YCharts.

That's a cheap valuation, and it reflects the fact that the market is skeptical about the longer-term outlook for the memory chip market. The primary concern is that once more supply is added -- and all of the major memory companies are expanding production capacity -- conditions will shift from a shortage to a glut and prices will crash, dragging down Sandisk's margins and its business. While that's a reasonable concern, it ignores a real possibility: What if the high demand from AI hyperscalers building new data centers continues to eat up the increased supply?

It's well documented that insufficient memory supply is now the chief bottleneck limiting the pace of AI data center development; once that issue is resolved, AI computing capacity could be built out at a faster rate. However, nobody knows what will happen to pricing. The higher sales volumes possible with increased supply may make up for the possibility of falling prices, in which case, memory chip stocks like Sandisk would remain strong investments. I think this possibility is being underappreciated by the market, which is why I think Sandisk stock could be a generational buy right now, as it's trading at such a cheap valuation that it's nearly impossible to ignore.

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.