Morgan Stanley flags a game-changing AI shift for SanDisk investors

I have been watching the memory chip cycle long enough to know that when Morgan Stanley's Joseph Moore, a 5-star analyst ranked 139 out of 12,314 Wall Street analysts, says something is a "fundamental repricing," it is worth stopping to understand exactly what he means.

The note Moore shared following investor meetings with the Sandisk (SNDK) executives the week starting June 21 is the kind of research that reframes an entire investment thesis rather than just moving a price target. 

Sandisk stock closed June 22 at $2,273.73, with a year-to-date return of 857.84%, according to Yahoo Finance. In fact, the company has the single best-performing stock in the S&P 500 in 2026, Slickcharts noted.

Moore's Overweight rating stands. His $1,750 price target, according to TipRanks, is 23% below the current share price. And yet his conclusion is explicitly bullish. That tension is the most interesting thing about the note.

Also Read: Sandisk Corp. Latest News and Stories

What Morgan Stanley's Moore is saying about AI and NAND

The core of Moore's argument is that Artificial Intelligence (AI) inference workloads are affecting the NAND market in ways nobody fully modeled two years ago.

Large language models running inference require enormous, fast-access storage for what are called KV caches and expanding context windows — essentially the working memory of an AI system in operation. 

DRAM alone cannot handle those volumes at scale. That creates direct pull demand for high-performance NAND to move up the memory hierarchy, filling a gap between expensive DRAM and slower storage tiers, according to the note shared with TheStreet.

Moore wrote the above quote in the note. The implication is significant. PC and mobile customers buy NAND primarily based on price. Cloud customers building AI infrastructure are buying based on capability and availability. 

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Pricing sensitivity is fundamentally lower. That changes the negotiating dynamic for suppliers like Sandisk entirely.

According to a report by MLQ.ai, Cloud is expected to overtake PC and mobile to become Sandisk's largest end market by the end of 2026. 

When it does, the company's revenue will increasingly be driven by customers who are less concerned with getting the cheapest storage and more focused on getting the right storage at scale.

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Sandisk's Q3 2026 fiscal numbers validate the thesis

What I find most striking about this story is the speed of the financial transformation. My honest take is that it's truly exuberant.

A company that lost $1.64 billion in fiscal 2025, according to Q4 fiscal 2025 results, is now generating billions in quarterly profit.

SanDdsk's third-quarter fiscal 2026 results, reported April 30, showed revenue of $5.95 billion — up 97% sequentially and above guidance — with GAAP net income of $3.615 billion, or $23.03 per diluted share.

Datacenter revenue grew 233% quarter over quarter following 64% growth in Q4. The cloud segment has been almost entirely driven by TLC-based drives, with QLC "Stargate" drives beginning to ship this quarter.

For fiscal Q4, Sandisk guided for revenue of $7.75 billion to $8.25 billion and non-GAAP EPS of $30.00 to $33.00.

CEO David Goeckeler continued. "We are also advancing to a new business model built on multi-year customer engagements backed by firm financial commitments."

The New Business Model agreements that give the bull case structural durability

The detail in Moore's note that I keep coming back to is the New Business Model (NBM) agreement disclosure. Sandisk notes that more than one-third of Sandisk's fiscal year 2027 bit output has already been committed under NBM agreements. 

These are long-term supply contracts that lock in pricing and volume with hyperscale customers. Three agreements were signed by the end of Q3, with two additional deals added in Q4.

Related: Bank of America resets Sandisk stock price target

Moore noted that the contracted business is running at gross margins above 80%. That’s a level he characterized as "emblematic of a commodity in a shortage" rather than a permanent new normal. 

But with more than one-third of the business locked in at those margins that far into the future, "the range of outcomes should be skewed to the upside," he wrote.

NAND supply and demand remain "very tight," according to Moore, with no line of sight to balance from Sandisk's management. He models ongoing average selling price increases through calendar 2026 and potentially well into 2027. 

The zero-debt balance sheet Goeckeler highlighted, combined with a recently authorized share repurchase program and strong cash generation, means Sandisk is capturing this cycle without the leverage risk that has historically amplified memory downturns.

Moore's $1,750 target sitting below the current price of $2,273 is a calibration question, not a directional one. His view is that as long as datacenter markets grow faster than NAND bit supply, suppliers retain pricing power. Right now, there is no evidence that the relationship is changing.

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