Sandisk (SNDK) has gained about 762.52% year to date at the time of writing, Wednesday afternoon, July 1. Meanwhile, the SPDR S&P 500 index (SPY) is up about 9.54% in the same period.
The third-largest enterprise solid-state drive (SSD) manufacturer has outpaced the S&P 500 by a wide margin, thanks to its position in the semiconductor sector, which is rallying on the AI boom.
Positive news driving Sandisk’s stock includes:
- Intel’s first-quarter earnings boosted confidence in the semiconductor sector.
- Bank of America revised its semiconductor industry forecast.
The stock closed 10.62% down, as the semiconductor sector is facing a somewhat prolonged sell-off. The drop comes despite Bernstein’s recent price target raise to $3,000.
Contrary to current sentiment, a research note shared with me, Bank of America analyst Wamsi Mohan and his team reiterated a bullish view on SanDisk and raised their price target.
Bank of America raises Sandisk stock price target
The team believes that the supply-and-demand imbalance in the NAND market will persist through the calendar year 2027. This should enable SanDisk to maintain pricing power for longer.
In its third quarter (Q3) of fiscal year 2026, SanDisk reported that it ended the quarter with three signed New Business Model (“NBM”) agreements and signed two additional NBM agreements in the fiscal fourth quarter.
These are multiyear contracts that improve revenue visibility.
Analysts said they expect a majority of cloud and client-segment customers to eventually sign NBM agreements.
Looking ahead, the team said they believe that Q4 fiscal year 2026 revenue and EPS will be $9.1 billion and $37.01, respectively. They noted that their estimates are higher than the Wall Street consensus, at $8.35 billion in revenue and $34.26 in EPS.
Mohan reiterated a buy rating on SanDisk stock and raised the price target to $2,500 from $2,100, based on a 10x multiple.
What do other analysts think, and how does Bank of America’s opinion compare? According to MarketBeat, 21 of the 25 analysts covering Sandisk stock rate it a buy. Four give a hold rating. The average price target is $1,684.24.
Bank of America flags risks for Sandisk outlook
Memory stocks are known for suffering from boom-and-bust cycles. The AI data center build-out and huge capital expenditure plans from hyperscalers have created an abnormally long boom part of the cycle for memory stocks.
The team noted that oversupply could cause a sharp drop in NAND prices.
Mohan wrote: “Some clients have expressed concern on long-term sustainability of memory demand if AI driven purchases are lower than expected.”
Analysts said that a rapid ramp by China-based competitor Yangtze Memory Technologies (YMTC) could impact NAND pricing due to additional supply entering the market, adding that they believe YMTC will focus on the China market.
More tech stocks:
- Bank of America resets Intel stock price target
- Morgan Stanley resets Nvidia stock forecast after key event
- Bank of America resets Broadcom stock price target after earnings
The Department of War recently released a list of Chinese Military Companies in Accordance With Section 1260H. We can call this simply the Pentagon’s blacklist, and YMTC is on it.
Bank of America’s view that YMTC will focus on the Chinese market makes even more sense, given that it is on that blacklist.
However, the latest developments in the market, driven by the aggressive pricing of memory chips, might change that.
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Memory cartel’s prices provoke Apple’s lobbying
Just like Sandisk has implemented NBM contracts, which are multiyear agreements, so has Micron (MU). Micron is the third-largest supplier of memory chips, and it has shifted its business model towards what it calls strategic customer agreements (SCAs).
In a way, memory chip manufacturers are behaving like a cartel. Bank of America calls this “increasing supply-side discipline.”
We can see the results from Sandisk’s Q3, which reported a GAAP gross margin of 78.4%, and it expects gross margin in the range of 78.9% to 80.9% in Q4. Micron’s Q3 FY26 GAAP gross margin was 84.6%, and for Q4, it expects 86%.
These are incredible margins for hardware companies, but they are putting pressure on the non-AI part of the tech industry, prompting an unusual reaction.
Apple is lobbying the Trump administration for clearance to buy memory chips from ChangXin Memory Technologies (CXMT), which is on the Pentagon’s blacklist.
CXMT isn’t a threat to Sandisk, as it only makes DRAM, but if one company gets the Pentagon’s green light, that opens the door for YMTC.
On top of this China problem, memory companies are ignoring the bigger issue: the macroeconomic effects of their pricing.
High memory prices might be a one headwind too many for the AI bubble
The AI bubble is already facing several headwinds.
Tech writer and prominent AI skeptic Ed Zitron published leaked OpenAI’s audited financial statements, which were verified by the Financial Times. This revealed an impressive increase in OpenAI’s net loss, from $5.09 billion in 2024 to $38.53 billion in 2025.
OpenAI is considering postponing its IPO until 2027, The New York Times reported.
To make matters worse for OpenAI, the era of “tokenmaxxing” has ended. Or, to put it simply, many companies are capping their use of AI because it is too expensive.
This has led OpenAI to consider drastically lowering its prices, according to the Wall Street Journal.
An unprofitable company at the center of the AI bubble is delaying its IPO and considering lowering prices.
After all the talk about demand for compute being sky-high, Meta has revealed it plans to launch a cloud infrastructure business to sell its excess capacity, Bloomberg reported.
This is the second company with an “excess” supercomputer capacity. The first one was xAI, when it decided to rent Colossus 1 to Anthropic.
Hyperscalers confirmed huge capital expenditures for this year. The surging prices of memory must be pushing them even higher.
But if the companies aren’t willing to pay high costs of AI models, and the companies making these models are unprofitable, yet they are the ones that need the capacity, why is this capacity being built?
Related: Bank of America resets Marvell stock price target