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The Memory Supercycle Is Here—2 Winners From 1 Breakup
By Jeffrey Neal Johnson. Posted: 2/4/2026.
Key Takeaways
- SanDisk is experiencing explosive growth driven by the need for high-speed drives that save the progress of artificial intelligence models during training.
- Western Digital is securing its position as a pillar of stability by returning capital to shareholders while providing the data lakes needed for storage.
- A shortage of manufacturing capacity for standard memory chips has created a favorable supply environment, supporting durable pricing power for the industry.
While the broader stock market has long focused on the processors that let artificial intelligence (AI) think, a massive rotation is underway into the hardware that gives AI a memory. About one year ago, Western Digital (NASDAQ: WDC) spun off its flash memory business to create SanDisk (NASDAQ: SNDK) as a standalone company. The market response has been dramatic.
SanDisk has surged roughly 1,500% since listing in early 2025, including a 140% gain in the past 30 days. As of Feb. 3, 2026, SanDisk stock is trading near all-time highs around $665. Its former parent, Western Digital, has also posted strong gains — up about 350% over the last year and trading in the $280–$290 range.
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Add your name and claim your free Gold IRA Guide today.That divergence signals the arrival of a memory supercycle. The infrastructure needed for AI has bifurcated the storage market into two essential lanes: extreme speed and massive capacity. The SanDisk–Western Digital split unlocked value by allowing each company to specialize, creating two distinct investment profiles.
SanDisk: The Vertical Growth Engine
SanDisk is trading as a high‑octane proxy for AI processing speed. Recent results suggest the rally is being driven by fundamentals, not just hype. In its Jan. 29, 2026 earnings report, SanDisk delivered numbers that surprised Wall Street:
- Revenue: $3.03 billion, up 61% year‑over‑year.
- Earnings per share (EPS): $6.20, roughly $3 above consensus estimates.
- Gross margins: Expanded to 51.1%, up markedly from 29.9% in the prior quarter.
The principal catalyst is forward guidance. Management forecasts next‑quarter EPS will roughly double sequentially to $12–$14. That outlook implies the stock's price‑to‑earnings ratio is compressing relative to expected earnings growth, making the valuation more attractive on a forward basis.
The technical driver behind this demand is a process called AI checkpointing. Large AI models must frequently save their training state to prevent catastrophic loss of work in the event of a crash. If a model loses progress, the cost in wasted compute time and electricity can be enormous.
To avoid that risk, data centers rely on SanDisk's enterprise solid‑state drives (SSDs) to write large volumes of data at high speed. This demand is effectively inelastic: organizations cannot afford to train state‑of‑the‑art models without reliable, ultra‑fast persistent storage.
Accordingly, SanDisk projects gross margins of 65%–67% next quarter, demonstrating significant pricing power.
Wall Street has been quick to revise estimates. After the report, UBS set a $1,000 price target, Cantor Fitzgerald raised its target to $800, and both Barclays and Citigroup moved theirs to $750. Those upgrades, along with others, suggest analysts now see stronger and more durable demand for high‑performance storage than previously thought.
Western Digital: The Value Fortress
While SanDisk chases aggressive growth, Western Digital has positioned itself as a fortress of stability and capital returns. The company focuses on cold storage — the massive repositories where raw data accumulates before processing.
On Feb. 3, 2026, Western Digital's board authorized an additional $4 billion in share repurchases, signaling management believes the stock remains undervalued despite its run.
Western Digital reported $3.02 billion in revenue for fiscal Q2, a 25% year‑over‑year increase. Unlike the volatile flash market, hard disk drives (HDDs) offer a lower‑cost way to store the petabytes of video, text and images that feed AI models. Much of this data sits in data lakes built on Western Digital's high‑capacity drives.
Key elements of the Western Digital thesis include:
- The 100TB roadmap: WDC has unveiled development plans toward 100‑terabyte drives, which are important for hyperscalers.
- UltraSMR adoption: New UltraSMR drives, including current 32TB and upcoming 40TB models, now represent over 50% of shipments and are helping margins expand.
- Long‑term agreements: The company has secured purchase contracts with major customers that run through 2028.
For income‑oriented investors, Western Digital presents a yield and buyback story, pairing the $4 billion buyback authorization with a quarterly cash dividend of $0.125 per share.
The Wafer Wars & a Zero‑Sum Supply Chain
Some investors worry that rapidly rising prices in memory will trigger overproduction and a collapse. This cycle is different because of a zero‑sum constraint in manufacturing capacity. Semiconductor fabs are prioritizing High Bandwidth Memory (HBM), which is physically stacked onto AI accelerators.
Foundries can only process a finite number of silicon wafers each month. The shift toward HBM consumes wafer capacity, leaving fewer wafers available for standard flash memory and storage controllers. That physical limitation creates a supply floor — manufacturers cannot immediately flood the market with additional chips because the raw processing capacity is tied up.
SanDisk has also taken steps to secure its long‑term supply. The company extended its joint venture with Kioxia through 2034, locking in wafer supply and reducing a key operational risk.
SanDisk is further innovating with an architecture it calls High Bandwidth Flash (HBF). Unlike traditional storage, HBF enables flash memory to sit closer to the processor, potentially handling inference workloads that previously required more expensive DRAM. If successful, HBF could open a new total addressable market for SanDisk and help justify a premium valuation.
The Storage Supercycle: Sprinters and Marathon Runners
The AI trade has matured. It is no longer solely about the chips that do the thinking; data gravity matters just as much. The SanDisk spin‑off from Western Digital has been a strategic win, producing two differentiated investment opportunities from the same business.
SanDisk is the sprinter: a high‑beta play on the immediate needs of AI processing speed, with volatile but fast‑growing earnings. Western Digital is the marathon runner: a lower‑volatility infrastructure play that offers steady capital returns through buybacks and dividends while capturing growth in long‑term capacity demand. In 2026, portfolios that need exposure to AI infrastructure should consider making room for both profiles.
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