Sandisk & The Illusion of Infinite Returns

Sandisk, or as the Guild of Alchemists and Venture Capitalists¹ prefers to call it, “Pure, Concentrated Opportunity,” has been enjoying a run that would make even the most optimistic goblin blush. Spun off from Western Digital (a name that frankly sounds like a medieval locksmith), it’s seen its value climb faster than a greased dwarf up a beanstalk. Nearly two thousand percent since the divorce, and a frankly alarming two hundred percent this year alone. One begins to suspect the involvement of minor deities.

This isn’t, of course, magic. It’s the predictable result of hyperscale cloud providers – those vast, digital kingdoms where all your cat pictures reside – hoarding Sandisk’s wares. Add to that a perfectly timed industry-wide shortage of NAND chips – the tiny, silicon sprites that store all this data – and you have a price surge that would make a dragon envious. Everyone’s predicting more of the same for the next little while, and naturally, the question arises: could a mere ten thousand crowns² invested today blossom into a king’s ransom? Let’s not get carried away.

Two Shortages & The Dance of Supply & Demand

Sandisk hasn’t just stumbled into good fortune. It’s been…assisted. By two major supply shortages. First, the old guard – Seagate Technology and Western Digital – found themselves unable to keep up with the demand for hard drives. These are the workhorses of data storage, the reliable, if somewhat clunky, beasts of burden in the digital realm. They’re essential for the arcane arts of AI training, which requires mountains of data. But the clever bits – the graphics processing units and central processing units – only need a small sip at a time. The rest sits patiently, waiting to be called upon, taking seconds to respond – a geological age in the digital world.

Hard drives are, historically, cheaper than Sandisk’s solid-state drives (SSDs). But when the supply of hard drives dwindles, the hyperscalers begin to look elsewhere. They’ve started shifting data storage to SSDs, especially when speed and performance are paramount. This has, unsurprisingly, increased demand for Sandisk’s drives. It’s rather like a particularly insistent queue forming at a single bakery.

The second shortage is in the memory chip market itself. The demand for high-bandwidth memory – a particularly demanding breed of RAM – has lured other chipmakers away from NAND production. They’ve decided to focus on the more lucrative, if less plentiful, DDR chips. This leaves Sandisk, stubbornly dedicated to NAND, to capture a larger share of the market. It’s a bit like a blacksmith being the only one in town still making horseshoes after everyone else has switched to making miniature catapults.

The result? Prices for NAND chips have skyrocketed. Sandisk cheerfully announced that the average selling price per gigabyte increased by a mid-30% last quarter, while bit shipments only increased by a low single-digit percentage. This translates to a 61% revenue growth and a gross margin expansion to 51.1%. One can almost hear the accountants cackling with glee.

It’s no wonder the stock has been soaring. The numbers support it. But those expecting Sandisk to increase a hundredfold – turning ten thousand crowns into a king’s ransom – might want to temper their enthusiasm. The universe, as a rule, doesn’t hand out fortunes for free.

Can Sandisk Keep the Magic Going?

Sandisk’s core product – the NAND flash chip – isn’t exactly a revolutionary invention. It’s a very good chip, certainly, but not one that’s protected by any significant economic moat. Its current pricing power stems from the convergence of the two shortages mentioned earlier – a fortunate alignment of celestial bodies, if you will. But when the supply of hard drives and high-bandwidth memory returns to equilibrium, so too will Sandisk’s pricing power. Its current earnings, therefore, are likely to be…transient.

That’s why investors shouldn’t pay a premium for Sandisk’s earnings, despite its growth outlook for the next two years. They need to consider the long-term potential of Sandisk and the NAND market. A wise investor, after all, doesn’t chase rainbows.

There are, admittedly, reasons to be bullish. Flash memory is now ubiquitous in almost all consumer devices. And SSDs could gain wider adoption in data centers if Sandisk and others can improve the technology to the point where the lifetime cost of ownership is closer to that of hard drives. It doesn’t have to match hard drive costs, as SSDs offer other benefits – compactness, longer lifespans, and greater energy efficiency. Considering the growing demand for storage among both consumers and data centers, the long-term trend in bit shipments should favor Sandisk.

However, pricing is bound to be volatile, and earnings could plummet when a glut of supply meets stagnant demand. At 19 times forward earnings, investors are suggesting that the current cycle could last several more years. However, management commentary from Sandisk, as well as other memory chipmakers and the hard drive makers, suggests that the supply shortage will only last until 2028. It’s one thing to pay 19 times earnings for 2026, but earnings could be far lower in 2028 or 2029, which would make the stock rather expensive at today’s price.

Sandisk is already a hundred billion crown company after its phenomenal run. Increasing a hundredfold would make it a ten trillion crown company. That’s more than twice as valuable as any other company in the market today. So, the odds aren’t very good that Sandisk can grow a hundredfold, or even tenfold, from here. Investors should expect much more modest results going forward. The pursuit of infinite returns, after all, is a fool’s errand.

The Guild of Alchemists and Venture Capitalists are known for their…optimistic assessments of value.
Crowns are the preferred currency of discerning investors, primarily because they sound more impressive than mere ‘dollars’ or ‘euros‘.

2026-03-22 05:52

Two Shortages & The Dance of Supply & Demand

Can Sandisk Keep the Magic Going?

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