Shares of SanDisk climbed 4.6% in Wednesday trading, closing at $753.69, following a series of analyst reports underscoring persistent strength in data center flash storage demand. This momentum comes despite the stock's significant appreciation over recent months, reflecting the expanding role of artificial intelligence beyond processing to encompass memory and storage infrastructure.
AI Inference Drives Storage Needs
The investment narrative is shifting as AI deployment moves from training models to inference—the process where models generate responses to user prompts. This phase demands rapid data movement and low-latency storage, creating a surge in demand for high-performance NAND flash solutions. Nvidia's CEO Jensen Huang recently declared the "inference inflection has arrived," a sentiment echoed by strong results from memory peers.
SanDisk's Financial Performance and Outlook
In its fiscal second quarter, ended in January, SanDisk reported revenue of $3.03 billion, a striking 61% increase compared to the same period last year. Sales from its data center segment soared 76% to $440 million. For the current quarter, the company provided guidance projecting revenue between $4.4 billion and $4.8 billion, with non-GAAP earnings anticipated in the range of $12 to $14 per share. Management also indicated gross margins could reach 65% to 67%, up from current levels above 50%.
Strategic Moves and Industry Context
SanDisk has taken steps to secure its supply chain, announcing an extension of its flash memory supply agreements with partner Kioxia through 2034. This long-term pact ensures manufacturing capacity for the coming decade. CEO David Goeckeler emphasized that customers are currently prioritizing supply security over pricing, especially AI developers racing to secure storage for inference workloads.
The positive trend is industry-wide. Micron, a key supplier of memory for AI applications, surpassed quarterly revenue estimates and provided an optimistic forecast. Similarly, Western Digital noted in February that soaring AI infrastructure demand was boosting its financials, even as it divests its remaining stake in SanDisk.
Valuation Concerns Emerge
Despite the bullish demand story, analysts are divided on SanDisk's valuation. Some research firms argue the stock remains reasonably priced relative to projected 2027 earnings. However, other models suggest a fair value closer to $717, near recent trading levels. Additional analysis points out that SanDisk trades at a higher forward sales multiple than many of its storage device peers, raising questions about its premium.
Risks on the Horizon
The memory sector remains cyclical, and the current AI-driven demand boom does not eliminate inherent risks. Analysts caution that supply could catch up to demand faster than expected, and execution challenges persist. In regulatory filings, SanDisk itself has warned that sharp price fluctuations, dependence on a limited number of large buyers, shifts in trade policy, and competitive maneuvers could materially impact results with little warning.
Furthermore, a potential global wafer shortage, highlighted by SK Group's chairman as possibly lasting until 2030, adds a supply-side wildcard. While this indicates a tight market, investors appear more confident in the durability of demand than in the sustainability of current elevated pricing levels.
The broader context includes Nvidia's projection that its AI chip revenue could reach at least $1 trillion by 2027, underscoring the vast scale of the infrastructure build-out. As AI inference becomes a primary workload, companies like SanDisk positioned in the storage layer are poised to benefit, though navigating the cycle and justifying valuations will be key challenges ahead.
