SK Hynix (SKHY +3.20%) and Sandisk (SNDK +1.28%) are among the leading names in the memory industry, and both companies have been clocking outstanding growth in recent quarters amid favorable demand-supply dynamics.
SK Hynix stock was recently listed on the Nasdaq, and it has witnessed a lot of volatility since then due to the rotation out of memory stocks. Sandisk, meanwhile, has delivered stellar returns to investors over the past year, driven by a phenomenal increase in revenue and earnings.
Does this make Sandisk a better semiconductor stock to buy right now? Or will SK Hynix's dominant position in the memory market help it deliver bigger gains by the end of 2027? Let's find out.
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SK Hynix enjoys a clear advantage over Sandisk
Sandisk is a pure-play NAND flash memory manufacturer. Its growth has been powered by the booming demand for artificial intelligence (AI) data center storage, which has led to a shortage of traditional hard disk drives (HDDs). As AI data centers started shifting to flash-based enterprise solid-state drives (SSDs), Sandisk's business took off.
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Counterpoint Research notes that Sandisk controlled 11% of the NAND flash market in the second quarter. However, its market share is eclipsed by SK Hynix and its subsidiary Solidigm, which together control 22% of the NAND flash market.
Another important point worth noting is that SK Hynix also manufactures dynamic random-access memory (DRAM) chips, a market where Sandisk doesn't operate. SK Hynix is a key player in the DRAM market with a 26% share, according to Counterpoint, which makes it a more diversified memory-focused investment over Sandisk.
Also, SK Hynix's dominant position in the DRAM and NAND flash markets helps explain why it is a much larger company.
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Of course, Sandisk's revenue and earnings have been growing at a faster pace than SK Hynix this year, but investing in the latter has certain advantages that could make it the better AI stock to buy and hold until the end of 2027.
The memory stock with stronger upside potential is...
SK Hynix's earnings per share could increase by 23% in 2027, according to consensus estimates. Meanwhile, Sandisk's earnings per share in fiscal 2027 (which will end in July next year) could triple. However, analysts expect a significant slowdown in Sandisk's earnings growth to just 23% in fiscal 2028.
NASDAQ: SKHY
Key Data Points
There is a solid chance of SK Hynix easily coasting past Wall Street's expectations in 2027, given its much larger market share in both DRAM and NAND flash. After all, the favorable trends that could lead to a 3x increase in Sandisk's earnings over the next year will be a tailwind for SK Hynix as well.
So, analysts seem to be underestimating SK Hynix's growth potential. Also, SK Hynix is trading at just 6.6 times forward earnings, well below Sandisk's forward earnings multiple of 28. The cheaper valuation can pave the way for stronger upside in SK Hynix stock, especially considering that its earnings growth could be much stronger than what analysts are expecting next year.
