Key Points
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Meta Platforms seems to have become the latest company to strike a long-term supply agreement with Sandisk for NAND flash storage chips.
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Sandisk already has a solid revenue pipeline, which is poised to get even better.
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Sandisk stock still has multibagger potential thanks to its solid earnings growth potential and attractive valuation.
- 10 stocks we like better than Sandisk ›
Meta Platforms (NASDAQ: META) has been investing heavily in building artificial intelligence (AI) data centers to power its social media properties and advertising platforms, and it isn’t relying solely on chips from external vendors to support its infrastructure build-out.
Reuters recently accessed an internal Meta memo revealing that the company is poised to begin producing a new AI chip starting in September. The Magnificent Seven company will use this chip to double its AI compute capacity to 14 gigawatts (GW) by next year. The news agency also noted that Meta has built an ecosystem of suppliers to support the development of its in-house chips, and Sandisk (NASDAQ: SNDK) is among them.
Let’s see why this high-flying memory stock could get a solid boost from Meta Platforms’ in-house AI chip.
Meta Platforms has reportedly entered into a long-term supply agreement with Sandisk
Memory chips are in short supply. Industry giant SK Hynix estimates that the shortage could last for the next four to five years, with wafer demand expected to exceed supply by 20%. This explains why hyperscalers such as Meta are trying to lock-in long-term supply of memory chips.
The memo seen by Reuters points out that Meta has struck a long-term agreement with Sandisk to procure flash storage for its data centers. It is easy to see why Meta has taken this step. Online tech publication The Next Platform notes that a total of 25 exabytes (an exabyte equals one billion gigabytes) of flash capacity is needed to deploy 1 GW of AI data center compute capacity.
Given that Meta is planning to significantly upgrade its AI data center capacity by next year, and it also plans to develop four generations of its in-house AI accelerators, the company needs access to a lot of flash storage. This is where Sandisk comes into play, given its position as the fifth-largest supplier of NAND flash memory.
What’s worth noting is that Sandisk has signed multiple long-term supply agreements lately. The company noted in its April earnings call that it signed five multi-year supply agreements, three in the third quarter of fiscal 2026 and two after the quarter ended. The three agreements it signed last quarter will help it generate at least $42 billion in revenue.
Sandisk management also remarked that it expects to “conclude additional agreements over the next few months,” and the reported Meta deal suggests that it is indeed making progress on this front.
The long-term agreements should ensure more upside for Sandisk investors
Sandisk stock has skyrocketed 538% in 2026, as of this writing. The multi-year agreements suggest that further upside could be in the cards. The $42 billion revenue pipeline that Sandisk disclosed last quarter is well above the company’s trailing-twelve-month revenue of $13.2 billion. Moreover, it hasn’t disclosed the value of the two other deals it closed after the year ended.
Moreover, the additional contracts that Sandisk expects to land, including the one with Meta, should help increase its revenue pipeline. Another important point worth noting is that Sandisk has included a variable pricing rider in these long-term agreements, which will help it “capture upside if prices rise.”
As the memory shortage is poised to continue, there is a strong likelihood of Sandisk benefiting from higher prices. That’s why analysts have been boosting their earnings expectations from Sandisk.
Data by YCharts
With the stock trading at just 25 times forward earnings, it makes sense to buy it right away. After all, Sandisk’s earnings reportedly jumped by a whopping 2,124% in the recently concluded fiscal 2026 to $66.51 per share. The chart above indicates that its bottom line is poised to grow further. If Sandisk’s earnings indeed reach $232.88 per share in a couple of years and it trades at even 20 times earnings, a small discount to the S&P 500 index’s forward earnings multiple of 21.7, its stock price could reach $4,657.
That’s a potential jump of 2.6x from current levels, indicating that it isn’t too late for investors to buy this high-flying growth stock.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
