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SanDisk Is Down 25% From Its High

Here’s the thing about a stock that goes up 750% in a year: eventually someone takes profits. That’s what’s happening with SanDisk (SNDK) right now, and the way people are reading it is almost entirely wrong.

The shares dropped roughly 10% on July 1 and then another 14% on July 2, part of a broad rotation out of AI hardware and into AI software names. Over two sessions, SNDK shed roughly 25% from its June 25 all-time closing high of $2,335. And yet BofA Securities raised its price target from $2,100 to $2,500 on July 1, maintaining its Buy rating. Bernstein lifted to $3,000 from $1,700. China Renaissance went to $3,169. The analyst community moved up while the stock moved down.

That gap is worth understanding.

Where Analysts Stand Right Now

• BofA Securities: Buy, price target raised to $2,500 (from $2,100) on July 1, 2026
• Bernstein (Mark Newman): Outperform, lifted to $3,000 (from $1,700) on June 29/30, 2026
• China Renaissance: Buy, raised to $3,169 (from $1,702)
• Consensus (22 analysts): Buy, average 12-month target approximately $1,864 — with a high estimate of $3,250

What SanDisk Actually Is

Most people still think of SanDisk as the company that made the little flash cards you used to stick in your camera. That company is gone. The 2025 spinoff from Western Digital created something entirely different: a vertically integrated NAND flash manufacturer sitting at the exact center of the AI infrastructure buildout.

AI data centers don’t just need chips for compute. They need massive, fast storage. And the industry supplying that storage has been running at capacity with no relief in sight. Hyperscalers including Microsoft and Google have been expanding data center capacity at a pace that has overwhelmed available NAND supply, and SanDisk — as one of the few large-scale independent NAND producers after its Western Digital spinoff — is capturing a disproportionate share of that demand.

The numbers make the case. In Q3 FY2026 (reported April 30, 2026), SanDisk posted revenue of $5.95 billion, up 97% sequentially and 251% year over year, against Wall Street guidance of $4.4 billion to $4.8 billion. The datacenter segment surged 233% sequentially, driven by strong adoption among AI infrastructure builders. Non-GAAP gross margin hit 78.4%, up roughly 27 percentage points from the prior quarter. EPS came in at $23.41 against a consensus estimate of approximately $14.66 — a roughly 60% beat. For context, the year-ago quarter delivered EPS of negative $0.30.

Management guided Q4 FY2026 revenue of $7.75 billion to $8.25 billion, with non-GAAP gross margin of 79% to 81% and EPS of $30 to $33. Those numbers were roughly double what analysts had modeled before the report. The next earnings call is scheduled for August 13, 2026.

The Structural Case

What makes this different from a typical memory cycle is the contract structure. SanDisk has signed five multi-year supply agreements — called New Business Model agreements — with hyperscalers, locking in pricing and volume commitments that smooth out the cyclicality that used to define this space. Three were signed by the end of Q3, with two more added early in Q4. The three Q3 contracts alone provide minimum contractual revenue of approximately $42 billion, backed by financial guarantees exceeding $11 billion and $400 million in prepayments already on the balance sheet.

That is not a cyclical company. That is a company that figured out how to get paid like a software business while selling hardware.

Slight tangent, but it matters: Morgan Stanley analyst Joseph Moore, following investor meetings with SanDisk executives in late June, noted that the contracted business is running at gross margins above 80% — a level he described as characteristic of a commodity in a shortage. With more than one-third of expected FY2027 output locked into these agreements, the range of earnings outcomes is skewed to the upside even in a scenario where spot pricing softens.

The structural demand driver is AI inference. As models get deployed at scale, the storage requirements for key-value caches and retrieval-augmented generation workloads are enormous and growing. AI accelerators need somewhere to park training data and inference checkpoints. That somewhere is high-capacity enterprise SSDs — and SSDs win on performance per watt and rack density, which matters when data centers are power-constrained. None of that demand is currently embedded in analyst forward models for 2027 and beyond.

Why the Stock Is Down

The sell-off isn’t about SanDisk specifically. There is no new company-specific bad news. Capital is moving out of high-momentum AI hardware plays and into AI software stocks — a pattern that hits names with the biggest year-to-date gains the hardest. SNDK entered the week up roughly 756% year-to-date. When a stock runs that hard, profit-taking can come fast.

Morningstar added fuel by warning of a potential 30% correction in AI stocks broadly. Micron’s simultaneous 10%-plus drop pulled SanDisk along. And a sharp rout in South Korean semiconductor stocks — SK Hynix fell over 14%, Samsung dropped roughly 9% — spread the selling globally. When you own the best-performing stock in your portfolio and you’re nervous about valuations and macro, you sell the thing that has the biggest gain. That’s most of what’s happening here.

The stock’s 52-week range runs from $40.10 to $2,354.39. It’s come an extraordinary distance. Some of those early buyers have been waiting for an excuse to trim.

Forward Scenarios

Bull: Q4 results on August 13 confirm revenue at the top of the $7.75B-$8.25B guidance range, datacenter demand continues to accelerate on AI inference and KV cache workloads, and gross margins push into the 80%-plus zone. BofA’s $2,500 target gets eclipsed. Bernstein’s $3,000 becomes the anchor.

Base: The rotation continues a few more weeks as the chip sector digests an extraordinary first half. SNDK stabilizes in the $1,700 to $1,900 range. The five NBM agreements provide earnings visibility, and the stock moves higher into the August earnings call as guidance resets expectations once more.

Bear: A faster-than-expected surge in NAND supply from Samsung, SK Hynix, or Chinese producers (YMTC/CXMT) breaks pricing power materially ahead of schedule. Contract margins compress on renewal. The trailing P/E near 70x leaves little room for disappointment if the growth story slows. Morningstar’s 30% correction thesis plays out across the sector.

Technical Picture

After two sessions of heavy selling, SNDK is now trading below all major short-term moving averages. The first resistance to reclaim is the Hull Moving Average near $1,822, then the 50-day EMA around $1,891 and the 50-day SMA near $1,908. A real recovery requires a sustained move back above $2,000. Key support sits around $1,730 to $1,750 based on recent session lows. The RSI has cooled to roughly 54 — off overbought, not yet oversold. The longer-term moving average stack (20-day above the 50-day, 50-day above the 200-day) still holds bullish alignment, but the short-term picture has clearly deteriorated.

What to Watch

Three things matter from here. First, any news on Samsung or SK Hynix capacity additions that could signal NAND supply relief ahead of schedule — that’s the primary fundamental risk to the pricing thesis. Second, the August 13 earnings call, where management will update on Q4 execution and any additional NBM agreement activity. Third, broader macro sentiment around high-multiple tech: elevated interest rate expectations have already been cited as a headwind for hardware stocks trading at stretched forward multiples.

The real question isn’t whether SanDisk’s business is growing. It clearly is. Q4 guidance alone — at up to $8.25 billion in revenue — implies a company that has fundamentally changed its earnings scale. The question is whether a forward P/E near 31x is defensible for a memory company while the broader tech market is repricing risk.

That tension is what the next six weeks will resolve. The August 13 earnings call is the next real data point. Until then, the stock is likely to move with sector sentiment more than fundamentals. That’s the nature of a two-day, 25% drawdown in a name that still trades at $300 billion in market cap.

For informational purposes only.