Soaring NAND Prices Offer Transient Boost to Overvalued Sandisk

What happened

Soaring DRAM and NAND memory prices are reshaping the technology landscape, providing a near-term revenue and margin tailwind for chipmakers like Sandisk, as reported in recent market coverage. This price surge could temporarily enhance Sandisk's financials, given its focus on NAND-based storage products, but the DeepValue master report highlights that the company operates in a highly cyclical, commoditized industry with volatile fundamentals. Despite a 871% stock surge since its 2025 spin-off, driven by AI hype, Sandisk's trailing EPS is negative, P/B is elevated at 5.44x, and Datacenter revenue declined 10% year-over-year in Q4 FY26 while Edge and Consumer segments dominate. The report cautions that recent cash flow improvements are partly from working capital releases and low capex, not structural profitability, and fixed obligations from Flash Ventures and SDSS agreements amplify downside risks. Thus, while soaring prices may delay a downturn, they reinforce the cyclical dynamics that underpin the bearish long-term view, with the base case fair value at $220, well below the current $349.63 price.

Implication

Soaring NAND prices provide a short-term earnings boost, but Sandisk's valuation already embeds peak-cycle assumptions, ignoring the industry's history of rapid normalization and oversupply. The company's reliance on commoditized Edge/Consumer segments and declining Datacenter revenue undermines the AI growth narrative, while fixed obligations from joint ventures and supply agreements could strain cash flow in a downturn. Recent free cash flow improvements are partly cyclical, driven by working capital changes and temporarily low capex, rather than sustainable profitability. Investors should monitor for signs of NAND price erosion, Datacenter performance, and balance sheet stress, as these could trigger a sharp correction. Until valuation aligns with through-cycle fundamentals, such as the base case $220 implied value, maintaining an underweight or avoiding exposure is prudent to mitigate downside risk.

Thesis delta

The news of soaring memory prices supports the short-term cyclical upturn anticipated in the Base and Bull scenarios, but it does not alter the core bearish thesis that Sandisk is overvalued relative to its through-cycle earnings power and faces structural headwinds. Investors should view any price strength as an opportunity to reduce exposure, as the cyclical boost is temporary and unlikely to sustain the current elevated multiples amid ongoing fundamental weaknesses.