Sandisk bulls had a surprising third quarter

The Sandisk (SNDK) bulls got hit with some cold water in the third quarter after being on fire for most of the year.

Shares of the momentum memory chip play have dropped 17% so far in the third quarter, which officially comes to a close on Wednesday. By comparison, the S&P 500 has gained 4.3%.

The pullback brings Sandisk's year-to-date gain down to 628%. Impressive, to say the very least.

Experts point to classic profit-taking in Sandisk after its big run for the softer third-quarter stock price performance. AI spending growth concerns also linger, as do worries that NAND prices may moderate in 2027.

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To be sure, nothing has changed fundamentally on the Sandisk story to warrant the pullback. The company is still poised to post strong earnings this year and next as the AI boom causes price inflation for the chips Sandisk makes.

At its August investor day, SanDisk said it had signed eight "New Business Model" agreements covering roughly 50% of its bits in fiscal 2027 and about two-thirds in fiscal 2028. This gives the company greater visibility into customer demand and pricing.

Execs also laid out long-term guidance calling for mid-to-high-teens revenue growth and approximately 80% non-GAAP gross margins from fiscal 2028 through 2030.

"Sandisk's core message is that NAND is entering a structurally stronger and longer-term demand environment driven by AI infrastructure and inference rather than traditional consumer replacement cycles. Datacenter demand has become the primary growth engine, fueled by hyperscale AI deployments, enterprise SSD adoption, AI data lakes, and growing KV cache requirements. While smartphones, PCs, and other Edge devices remain important, the company expects those markets to reaccelerate beginning in 2027 as AI-enabled devices drive higher storage content per unit," Citigroup analyst Asiya Merchant said,

SanDisk reports earnings on Oct. 29, which could be the catalyst the bulls need.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the Sozzi Unleashed morning show, the 'Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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