SanDisk's Explosive Datacenter Growth Meets a Wall of Skepticism as Shorts Hit Records

Despite a 251% revenue surge and $42B in committed contracts, SanDisk faces record short selling as skeptics question valuation sustainability.

SanDisk has become one of the most dramatic stories in the memory-chip universe this year, with its stock nearly six times higher since January and a fresh all-time high set this week. But behind the headline rally, a fierce tug-of-war is playing out: the company’s record high on May 28 at $1,641 coincides with short positions hitting their highest level in quarters, signaling a deep divide over whether the valuation can hold.

The fuel for the bull case comes straight from the datacenter. In its fiscal third quarter ended April, SanDisk reported revenue of $5.95 billion, up 97% sequentially and 251% from a year earlier. The datacenter segment alone delivered $1.47 billion, a staggering 233% quarter-over-quarter jump and a 645% year-over-year surge. Gross margins widened to 78.4%, and adjusted diluted earnings per share hit $23.41, up from $6.20 in the prior quarter. On a GAAP basis, net income reached $3.62 billion, or $23.03 per diluted share, and the company now sits debt-free.

What separates SanDisk from classic memory-cycle plays is a web of contractual guarantees that executives argue make this rally structurally different. Chief technology officer Alper Ilkbahar has described the current memory bottleneck as a long-term trend, not a fleeting one. To back that up, the company has signed five multi-year supply agreements, the first three of which secure at least $42 billion in committed revenue, backed by over $11 billion in financial guarantees. A joint venture with Kioxia runs through 2034 and includes agreed-upon price floors and ceilings, smoothing out the traditional NAND volatility. Meanwhile, SanDisk is developing High Bandwidth Flash (HBF) technology aimed at AI inference workloads, positioning itself for the next wave of compute demand.

The fourth-quarter outlook keeps the pressure on. Management guided for revenue between $7.75 billion and $8.25 billion, with adjusted diluted EPS of $30 to $33. A new $6 billion share buyback program underscores the confidence in that trajectory. Investors will get the next update on June 9, when executives appear at the Mizuho Technology Conference at 12:20 p.m. Pacific time, where NAND pricing, enterprise SSD demand, and capital allocation will be in focus.

Several analysts have raised price targets in response to the numbers, but the record short interest tells a different story. Skeptics see a stock that has already priced in a perfect execution scenario and question whether the ramp in datacenter demand can sustain the pace needed to justify the valuation. With the forward guidance implying nearly 40% sequential revenue growth from the current quarter, the coming months will test whether SanDisk’s locked-in contracts and emerging HBF technology can bridge the gap between the bulls and the bears.