Over the past year, artificial intelligence-related stocks have led the market, with some individual stocks surging by more than 500%. Despite the astonishing gains, this does not mean they have no further room for upside. Two momentum-driven AI-related stocks are worth watching.
SanDisk (SNDK) has skyrocketed 2,900% over the past year. As a pure-play name in the NAND flash memory space, the company has benefited from a severe supply-demand imbalance, which has driven NAND prices sharply higher, in turn boosting revenue surges and significant gross margin expansion. This supply-demand imbalance stems from multiple factors: after the pandemic, the NAND market collapsed due to the early pull-forward of demand for electronic products and computers, prompting the three major memory manufacturers to cut NAND production capacity and shift resources toward DRAM. Since then, these companies have primarily focused on high-bandwidth memory (HBM) supporting AI chips. However, after NAND capacity was reduced, demand for high-capacity solid-state drives used to store AI training data began to surge.
Although the memory business has historically been highly cyclical, SanDisk has begun signing long-term agreements. Five contracts have been signed so far, with terms of up to five years, of which the first three have a combined minimum value of $42 billion, covering one-third of expected capacity for fiscal year 2027, with the company targeting to increase this proportion to more than 50%. At the same time, SanDisk expects revenue to grow at mid-to-high double-digit rates in fiscal years 2028 to 2030, with adjusted gross margins remaining around 80%. Despite the sharp rise in its stock price, its forward price-to-earnings ratio is only 7 times, and if it can sustain steady growth through 2030, the stock still has upside potential.
Micron Technology (MU) has risen nearly 700% over the past year. As one of the three major memory manufacturers, 76% of its revenue last quarter came from DRAM and 24% from NAND. Micron faces a market environment similar to SanDisk, with a supply-demand imbalance in memory driving revenue growth and gross margin improvement.
The DRAM market is primarily driven by HBM demand, whose growth moves in tandem with demand for AI chips. However, supply remains consistently constrained and is unlikely to ease in the short term. The reason is that the critical layers of HBM are manufactured using extreme ultraviolet lithography (EUV) equipment, which is produced globally only by the Dutch company ASML, with limited annual output. At the same time, the wafer capacity required for HBM is more than three times that of conventional DRAM, further limiting capacity expansion and crowding out supply of regular DRAM, causing prices for all DRAM to surge. Micron’s stock is also cheaply valued, with a forward price-to-earnings ratio of only 6 times, and it has locked in long-term contracts. If this supercycle extends through 2030 and beyond, the stock still has ample room to rise.
Summary: SanDisk and Micron Technology have both achieved astonishing gains over the past year, benefiting respectively from the NAND flash supply-demand imbalance and HBM-driven DRAM price increases. Both companies have built competitive moats in their respective fields, and their current valuations are relatively reasonable. If the long-term demand for AI infrastructure construction continues to materialize, these two companies are well positioned to continue benefiting from this supercycle.
