Western Digital (NYSE: WD) spun off Sandisk (NASDAQ: SNDK), one of the world’s largest flash memory chipmakers, in Feb. 2025. Sandisk’s stock started trading independently at $36 per share, but it eventually soared to a record high of $2,335 per share on June 25, 2026.

That rally was driven by the explosive growth of the AI market, which forced data centers to upgrade their servers with faster solid-state drives (SSDs). But as of this writing, Sandisk’s stock trades at $835. Let’s see why its stock was cut in half — and if it’s becoming too cheap to ignore.

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How fast is Sandisk growing?

For years, Sandisk was a cyclical producer of NAND chips, which are used as flash memory in SD cards, USB drives, and SSDs. Western Digital, a leader in platter-based hard disk drives (HDDs), acquired Sandisk in 2016 to increase its exposure to SSDs — which were smaller, faster, more power-efficient, and less prone to physical damage than HDDs.

As the data center market expanded, Sandisk launched ultra-dense enterprise SSDs to consolidate dozens of hardware server racks into single drives. But when WD spun off Sandisk, the AI market’s expansion hadn’t generated massive tailwinds for that business yet.

In fiscal 2025 (which ended in July 2025), Sandisk’s revenue rose 10%, its adjusted gross margin jumped from 14.8% to 30.3%, and it returned to profitability on an adjusted basis.

But in fiscal 2026, its revenue surged 176%, its adjusted gross margin more than doubled to 71.6%, and its adjusted EPS skyrocketed 2,271%. That explosive growth — which was entirely driven by the AI market’s insatiable demand for high-density enterprise SSDs — propelled Sandisk’s stock to its all-time high this June.

For fiscal 2027, analysts expect Sandisk’s revenue and adjusted EPS to rise 145% and 220%, respectively. Yet its stock trades at less than four times this year’s adjusted EPS.

Is Sandisk’s stock ridiculously undervalued?

Sandisk’s stock trades at such a low multiple for three reasons. First, it’s still valued as a cyclical chipmaker rather than a high-growth AI stock. Looking past its current growth spurt, analysts expect its revenue to only rise 22% in fiscal 2028 and less than 1% in fiscal 2029.

Second, the AI market will face unpredictable challenges after the Democrats swept the House and Senate during the midterm elections. Several prominent Democrats — including Texas governor-elect Gina Hinojosa — want to pause the construction of new data centers.

Lastly, rising interest rates are making it difficult for AI infrastructure companies to secure fresh funds. All of those challenges could finally cool the AI market — and the current chip shortages could quickly turn into supply gluts as the market gets saturated with excess chips.

The bulls expect these headwinds to dissipate as more companies overcome the macro and regulatory challenges and ramp up their AI spending again. The bears warn that Sandisk — and other AI memory chipmakers like Micron (NASDAQ: MU) and SK Hynix (NASDAQ: SKHY) — could sink a lot lower if the AI growth cycle doesn’t last as long as expected.

Over the past three months, Sandisk’s insiders sold nearly 23 times as many shares as they bought. There were also 8.5 times as many sellers as buyers over the past 12 months. That chilly insider sentiment suggests Sandisk might struggle to revisit its all-time highs.

When would I buy Sandisk?

Sandisk’s stock looks shaky right now, but I think the mid-$830s is actually a good entry point for long-term investors who can tune out the near-term noise.

Sandisk has a limited trading history, but Micron’s forward price-to-earnings ratio has usually bottomed out at 3x-4x during cyclical downturns. Therefore, Sandisk’s downside potential could be limited at these levels, even if the AI boom abruptly ends. But if the AI boom accelerates, its current growth cycle could last a lot longer — and its stock could fetch a higher valuation.

Should you buy stock in Sandisk right now?

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Walker & Dunlop. The Motley Fool has a disclosure policy.

Sandisk Stock is Falling Sharply. Here’s the Price at Which I’d Buy. was originally published by The Motley Fool