SanDisk stock SNDK has gained 500% this year so far. While the memory market has been notoriously cyclical, SanDisk is attempting to reduce its exposure to the traditionally cyclical NAND memory market through a new long-term agreement business model.
Under these agreements, the company commits to delivering specified volumes of products over multiple years, while customers commit to purchasing those volumes.
Pricing can include fixed and variable components, with financial guarantees providing additional protection if customers fail to meet contractual obligations.
According to the company’s fiscal 2026 10-K, SanDisk expects these new business models, or NBMs, to become its predominant way of doing business.
The company said the structure should improve revenue predictability, production planning and supply assurance, although it does not eliminate risks related to demand, market conditions or execution.
SanDisk has signed multi-year agreements with eight data-center customers, including three US hyperscalers.
The agreements have a minimum total contract value of $93.9 billion.
They are expected to cover 50% of the company’s bit shipments in fiscal 2027 and 67% in fiscal 2028.
The company’s CFO Luis Visoso said the agreements include pricing floors and ceilings, with floor pricing supporting gross margins of around 80%.
The contracts therefore provide SanDisk with greater visibility into both future volumes and profitability.
Kioxia joint venture supports capital efficiency
SanDisk also benefits from its long-standing manufacturing partnership with Kioxia Holdings.
The companies have extended their joint venture framework at Kioxia’s Yokkaichi plant in Japan through December 2034.
The partnership, which has operated for more than 25 years, allows the companies to jointly develop technologies and manufacture flash-based memory wafers.
Their combined manufacturing footprint accounts for 33% of global wafer production.
The company has attributed its capital efficiency to research and development innovation and the reuse of manufacturing tools.
This structure could help SanDisk manage the capital requirements associated with expanding memory production while sharing manufacturing resources with Kioxia.
High-bandwidth flash adds potential AI upside
SanDisk is also pursuing opportunities tied to artificial intelligence through high-bandwidth flash, or HBF.
The company and SK hynix jointly established the HBF standard to address memory-capacity constraints associated with high-bandwidth memory.
According to SanDisk’s investor presentation, HBF can provide eight to 16 times higher memory capacity at a given bandwidth. The technology is particularly aimed at high-context AI inference workloads.
SanDisk has completed the design of its first HBF chip and remains on track for a launch in 2027, followed by mass production in 2028.
The technology has received support from major cloud and AI companies, including Alphabet, Meta Platforms and Tenstorrent. Nvidia adoption remains pending.
Importantly, the potential contribution from HBF is not included in SanDisk’s current fiscal 2028 to fiscal 2030 projections, which target a mid-to-high-teens revenue compound annual growth rate.
From a valuation perspective, SanDisk trades at a higher forward EV/EBITDA multiple than its memory semiconductor peers.
The company’s one-year forward multiple is cited at 6.3 times, compared with a peer average of 4.1 times.
Lynx Research has also issued bullish price targets, setting a $2,450 target for SanDisk and $1,325 for Micron.
The firm argued that the extreme volatility seen in May and June had eased, with institutional buying becoming more deliberate.
Overall, SanDisk’s long-term contracts, manufacturing partnership with Kioxia and potential HBF opportunity provide several factors investors are watching as the company seeks to balance memory-market cyclicality with rising AI-related demand.
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