Few investors expected 2026 to start much like last year. Sandisk (NASDAQ: SNDK). At the time of writing, shares are up about 635% year-to-date, although they have fallen sharply from a high of 884% thanks to the recent artificial intelligence-related sell-off. However, many investors are wondering if stocks have gotten too hot and need to cool down some more, or if now is the perfect time to buy stocks on sale.
Let’s look at what caused this rally in the first place, since Sandisk’s situation is unusual compared to most stocks that are on a parabolic trajectory.
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Massive Market Trend Sends Sandisk Shares Higher
Sandisk produces NAND memory, which is used to store data in all types of computing devices. However, recently there has been a sharp increase in the use of NAND in solid-state drives (SSDs). SSDs are used in data centers for long-term data storage. Given that artificial intelligence software must store almost unprecedented amounts of data for training, and then have quick access to previous chat results and vast amounts of other information to work properly during the inference phase, data center demand for SSDs has skyrocketed.
The memory industry was not prepared for such a surge in demand, which now far exceeds supply, so prices have skyrocketed. Because Sandisk is suddenly able to charge much more for its products, its revenue and earnings are skyrocketing. Before the surge in demand, Sandisk was a boring cyclical stock and the market had limited expectations for it, so its valuation was extremely low at just 0.6 times forward earnings at this point last year.
SNDK PE Ratio (Forward) data from YCharts.
However, as growth accelerated and the trend became more durable, the share price skyrocketed, trading at more than 35 times forward earnings. It currently trades at 9.3 times forward earnings. (Most of this recent decline was a result of Sandisk’s fiscal 2027 start on July 1; the estimate now reflects higher earnings forecasts for the new fiscal year.)
The big question now is how long will this increased demand for memory last? According to an industry colleague micron (NASDAQ: MU), the company expects tough market conditions to continue beyond calendar 2027, which is great news for Sandisk shareholders.
With Sandisk’s share price back at relatively cheap levels and likely with another year or more of strong growth ahead due to supply constraints, Sandisk stock looks like it could continue to rise and now may be the time to buy it on sale. While it may seem counterintuitive, this is the market environment Sandisk operates in. If data center construction continues to increase, this imbalance between supply and demand for memory could last for years.
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Micron Technology. The Motley Fool has disclosure policy.
Sandisk shares are up nearly 635% in 2026. Can they still go higher? originally published by The Motley Fool