For technology investors, generative artificial intelligence (AI) has been a once-in-a-lifetime opportunity to lock in massive equity returns in a relatively short period of time. Sandisk (SNDK -6.81%) has been one of the best examples of this phenomenon. Despite recent declines, shares are still up by an eye-popping 2,800% over the last 12 months -- enough to turn a $10,000 investment into roughly $290,000.
That said, past performance doesn't guarantee future results, and there are signs that Sandisk is entering a new phase. Let's explore how the outlook for AI infrastructure spending and rising competition could influence the stock's performance over the next five years and beyond.
NASDAQ: SNDK
Key Data Points
Why did Sandisk stock soar?
OpenAI launched its groundbreaking AI large language model (LLM), ChatGPT, in late 2022. Savvy investors quickly realized that most of the early gains would be captured by companies providing the computing infrastructure that makes running and training such algorithms possible.
Nvidia and other AI chipmakers emerged as early winners. However, by late 2025, their products were advanced enough to expose a new bottleneck in the supply of computer memory hardware powerful enough to keep up. The revenue and margins of memory producers surged, and investors poured into the industry leaders, sending their stock prices parabolic.
Sandisk serves the opportunity through its focus on solid-state drives (SSDs), which stand out from older storage technologies like hard disk drives (HDDs) because they use flash memory instead of moving mechanical components. This allows for faster speeds, greater reliability, and lower data consumption. For data centers that can be the size of a dozen football fields, these advantages can add up to huge cost savings and a clearer pathway to operational profitability, even if upfront costs are higher.
Can the boom last?
Sandisk's recent operational results have been nothing short of breathtaking. Fourth-quarter revenue surged 175% year over year to $20.2 billion, driven by insatiable data center demand (up 437%). Hyperscalers are buying the company's high-end storage solutions practically as fast as they can be produced, allowing the company to enjoy exceptional growth while also charging much higher prices than normal.
The company's gross margin now stands at 84.6%, a level so high that it is typically seen in software companies that don't even sell physical products. The positive momentum looks likely to continue in the short term, with industry players like South Korea's SK Hynix expecting shortages to last until 2030. Furthermore, U.S. tech giants continue to increase the amount of resources they are committing to AI development, with analysts at Goldman Sachs expecting capital expenditures to top $1 trillion in 2027.
Image source: Getty Images.
Where will Sandisk stock be in five years?
Over the coming years, Sandisk looks very unlikely to go back to where it was before. Even if AI data center build-outs eventually slow down, these massive complexes could also boost long-term demand for the company's NAND flash as hardware ages and needs to be replaced. LLMs will also naturally become larger and more demanding of memory.
That said, Sandisk also faces some major risks. For starters, extremely high margins tend to attract competition and substitution. With gross margins exceeding 80%, the company is in the danger zone.
Historically, one of the biggest threats to hardware margins has been China. Chinese memory producers like ChangXin Memory Technologies and Yangtze Memory Technologies could eventually scale up their manufacturing capacity enough to become real threats to U.S. and South Korean leaders. Investors shouldn't underestimate this threat because the country has a track record of leveraging state resources to support industries it deems strategic. The rapid rise of Chinese electric vehicles is an excellent example of how fast it can happen.
With a price-to-earnings (P/E) multiple of just 19, Sandisk's valuation seems to price in most of these challenges. But pessimism remains high, and investors looking for millionaire-maker returns may want to wait for an even lower price before considering a long-term position in the stock. The risks seem to outweigh the potential rewards right now.
