A sharp selloff in SanDisk shares, triggered by an announcement from Alphabet, is being characterized by several market experts as an overreaction. The stock, which plunged approximately 18.5% over several days, has begun to stabilize as analysts counter fears surrounding a new data compression technology.
Solid Fundamentals Underscore Long-Term Value
Beyond the recent volatility, SanDisk’s underlying business performance remains robust. The company reported strong results for its second fiscal quarter of 2026, with revenue reaching $3.03 billion. This figure represents a substantial 61% increase compared to the same period last year. On an adjusted basis, earnings per share came in at $6.20, significantly surpassing analyst consensus estimates of $4.85.
Looking ahead, management has provided an optimistic outlook for the third fiscal quarter of 2026, forecasting revenue of approximately $4.6 billion. The company cites rising NAND flash memory prices—which increased 38% in the first quarter of 2026—and sustained high demand from the data center sector as key growth drivers.
Algorithm Announcement Sparks Excessive Fear
The market downturn was precipitated by Alphabet’s introduction of “TurboQuant,” a new compression algorithm purported to reduce the memory requirements of AI applications by a factor of six. Initial investor sentiment interpreted this development as a direct threat to NAND memory producers like SanDisk.
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However, analysts have moved quickly to assuage these concerns. Mark Newman, an analyst at Bernstein, stated that the fears are “overblown.” He argues that relentless global data growth will likely offset any potential efficiency gains from such technologies, leading to sustained demand for storage solutions.
This perspective is supported by the Jevons Paradox, an economic principle observing that improvements in resource efficiency often lead to an increase in total consumption, not a decrease. The broader memory sector’s recovery, evidenced by the stabilization of shares in peers like Micron and SK Hynix on Tuesday, suggests the calming sentiment is sector-wide.
Major Firms Maintain Bullish Stance
In light of the pullback, prominent financial institutions are reaffirming their confidence in SanDisk. Bank of America has maintained its price target of $900 per share. Meanwhile, strategists at Morgan Stanley have identified the recent price decline as a potential entry point for investors.
With SanDisk shares currently trading around $635, the Bank of America target implies an upside potential of more than 40%. This significant gap highlights the divergence between the short-term algorithmic scare and the long-term fundamental view held by several market observers.
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