Key Points
Sandisk is a key provider of long-term computer storage solutions that are seeing huge demand.
AI hyperscalers are starting to boost their capital expenditure guidance due to rising chip prices.
Although Sandisk (NASDAQ: SNDK) has rallied from its recent lows, it's still down around 50% from its all-time high. For a company that was the hottest stock in the market in the first half of the year, losing half of its value in a month is nothing short of incredible.
I think investors should take advantage of this sell-off. There's one central fear regarding the memory chip market, and it's a valid one. However, I believe the timeline is off, and investors have a good opportunity to buy the stock now.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Image source: The Motley Fool.
The memory chip market isn't even close to a downturn
Sandisk is a memory chip manufacturer and produces NAND memory, which is used in long-term data storage applications. The most in-demand products are solid-state drives (SSDs), which are deployed in massive quantities in data centers to store mountains of information necessary for AI models to function.
While there are several other NAND and SSD manufacturers, there really isn't anything that sets one apart from another, so the product is commoditized. So, when a huge demand wave like what's happening now hits, and there's a lack of supply, prices skyrocket. That's exactly what's going on now, and Sandisk is benefiting from it.
However, this cuts both ways. When the memory chip demand curve eventually levels out, prices will decline. That's why the market is skeptical of Sandisk's long-term investment viability, as it's worried about an eventual downturn.
The question is, how long will it be? Most indications point toward sometime well after 2027, leaving at least a year and a half of strong market conditions. That's plenty of time for Sandisk's stock to rebound and achieve new all-time highs, making it an intriguing stock to buy now.
Memory chip products are still getting more expensive, which means there's still a pricing imbalance. Amazon boosted its $200 billion capital expenditures for 2026 to $220 billion due to rising memory chip prices. That's a major spender in the industry calling out these manufacturers, and until there is some limit reached for memory chip prices or supply, prices will continue rising.
That's part of the reason Wall Street estimates Sandisk will grow its revenue by 151% during fiscal 2027 (ending June 30). I think this lasting strength in the memory chip market will create a longer investment cycle than most are used to, and Sandisk stock will eventually regain its highs. As a result, it's a great buy in August.
Keithen Drury has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.