SanDisk (NASDAQ:SNDK | SNDK Price Prediction) and Western Digital (NASDAQ:WDC) have seen explosive growth over the past year. The cause is pretty obvious: data centers. They require massive amounts of storage hardware, and both of these companies produce plenty. Unfortunately, all that production is not enough to meet demand.
Hyperscalers alone are investing to the tune of $400 billion this year. Much of that spending is on hardware required by AI. Text AI models alone were enough to lift these stocks two years ago. Now, video and image AI models are training on 4K videos, so you can imagine just how much demand these companies are seeing.
However, is this explosive demand here to stay, and does it justify how much you’re paying for both of these stocks? SNDK stock is up over 1,250% over the past year, whereas WDC stock is up by over 400%. Their stock prices have gone up much faster than earnings. Let’s first look at Western Digital.
WDC stock may not be as expensive as you think
If you compare what you’re paying for them right now, it will look quite expensive. For instance, you are paying over 35 times earnings for WDC stock, whereas the median has been ~18 times earnings over the past 10 years.
The difference this time around is that the ongoing boom is not cyclical. The data center buildout has continued for the past three years uninterrupted and could actually accelerate further. Compared to the broader industry, WDC’s premium sits right in the middle of the broader “Hardware” sector. You’re not paying too much.
Analysts expect ~35% annual EPS growth over the coming years, along with ~17% annual revenue growth. Both of these metrics can prove to be a severe undercount since many analysts are still skeptical about AI and have dragged down the averages. This is also why Western Digital managed to beat EPS (minus non-recurring items) by almost 13% in Q3 and beat revenue estimates by 3.4%.
If anything, WDC stock is still undervalued. The market is in the midst of recalibrating a fair value for this stock. As long as hyperscalers live up to their commitments, this company can keep beating estimates, and you may see it trade near 50 times earnings by next year.
SanDisk is riskier, but can outperform
SanDisk was actually separated from Western Digital earlier last year. The price action has been even more explosive in percentage terms as it started off from a smaller base. However, it is a smaller company and only reported $112 million in net income in Q3 2025. This is 10 times less than Western Digital’s $1.2 billion net income during the same period.
The market cap of $72 billion is not far from Western Digital’s $84 billion, but this doesn’t mean it’s a weak pick.
Western Digital dominates the HDD market with approximately 62.83% market share versus Seagate’s (NASDAQ:STX) 37.17%. In the enterprise SSD market, Samsung, Western Digital (including SanDisk), Micron (NASDAQ:MU), and Intel (NASDAQ:INTC) collectively hold about 70% market share.
SanDisk could very well outperform Western Digital if AI spending continues to balloon, since the NAND shortage has caused SSD prices to skyrocket, and AI companies are spending liberally on faster hardware.
Earnings estimates on SanDisk say you’re paying less than 18 times FY 2027 (ends in June 2027) earnings. That’s quite cheap for a growth stock of this caliber. SNDK stock can more than double from here if the market pays ~35-40 times forward earnings.
WDC stock is trading at just 22 times forward FY 2027 (ends at the same time as SanDisk). The difference is that SanDisk is expected to retain higher levels of growth in the coming years.
Why I’d still buy both WDC and SNDK stock
I believe it’s still worth backing up the truck on both of these stocks.
If you were to buy only one, I’d buy SNDK stock. It is more aggressive and is comparatively cheaper if you believe the AI growth is here to stay.
A 50/50 split between SNDK and WDC is what I’d do if you are more conservative and not sure how the rally will end up. Western Digital has “stickier” contracts, and HDDs can see more demand if AI companies can no longer afford SSDs.
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