Is It Too Late to Buy Sandisk After Its 568% Run?

In February 2025, Western Digital spun off Sandisk (NASDAQ: SNDK) as an independent company. Shares began trading on the Nasdaq at around $35, and Sandisk stock has risen by a jaw-dropping 4,300% over the last 18 months. In 2026 alone, Sandisk has soared 568% -- making it the top-performing stock in the Nasdaq-100.

The company's rapid ascent has left some investors wondering whether the opportunity has already passed by. Let's explore the dynamics of the artificial intelligence (AI) memory market to better understand the drivers behind Sandisk's climb and assess if the rally can continue.

Image source: The Motley Fool.

Why is Sandisk stock up so much?

At the core of Sandisk's rise is a supply-demand imbalance amplified by AI infrastructure build-outs. Hyperscalers such as Microsoft, Amazon, Alphabet, Meta Platforms, and Oracle have collectively earmarked more than $700 billion in capital expenditures (capex) for 2026 alone. According to research from SemiAnalysis, big tech is expected to allocate 30% of its capex budget to memory solutions this year.

Sandisk is strategically placed in the NAND flash section of this AI spending. The company's enterprise solid-state drives (SSDs) are optimized for inference workloads and data lakes. This has fueled accelerated growth in Sandisk's data center segment, where trailing sales rose 437% over the last year to $5.2 billion.

What could propel Sandisk stock higher?

Several overlooked factors position Sandisk to sustain momentum. First, the company has locked in long-term "New Business Model" supply agreements with eight data center and edge customers.

These contracts carry a weighted-average duration of four years and guarantee a minimum of $93.9 billion in contracted revenue at floor pricing. This covers half of the company's fiscal 2027 bit supply and two-thirds of fiscal 2028. This level of visibility is unprecedented in a memory industry that long featured short-term contracts and boom-bust pricing.

Capital returns further reinforce the bull case. During the fourth quarter, Sandisk executed $4.5 billion in share repurchases and recently authorized an additional $15.5 billion buyback.

I think the most overlooked catalyst is Sandisk's joint venture with Japanese memory specialist Kioxia. This relationship helps Sandisk keep its capex at a minimal percentage of sales. In turn, the company can allocate more resources toward improving existing chip architectures rather than spending on additional manufacturing and factories.

Is it too late to buy Sandisk stock?

Wall Street's consensus estimates project Sandisk to more than double its earnings over the coming year. Sandisk trades at a forward price-to-earnings (P/E) ratio around 7. This is a steep discount compared to other leading chip stocks as well as the broader semiconductor industry average of 27.

SNDK EPS Diluted (TTM) data by YCharts

While memory stocks have historically traded at single-digit multiples due to cyclicality, Sandisk's multi-year backlog, growing free cash flow, and secular AI tailwinds justify a meaningful rerating. Against this backdrop, the current valuation profile still appears to embed lingering skepticism that the AI infrastructure cycle will revert, yet evidence of locked-in demand suggests otherwise.

In my eyes, Sandisk is far from priced to perfection. An investment in the company offers compelling upside thanks to the transformed economics of Sandisk's business.

Adam Spatacco has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Oracle, and Western Digital. The Motley Fool has a disclosure policy.