SanDisk’s Hedge-Fund Stampede Meets a Reckoning on Valuations

David Tepper's $179M stake adds to institutional buying spree, but SanDisk's 400% rally and 430% overvaluation signal potential pullback as growth drivers fade.

SanDisk has become a magnet for big-money wagers, none louder than David Tepper’s Appaloosa Management, which built a $179 million stake in the memory-chip maker during the first quarter of 2026. The move by the veteran hedge-fund manager adds to a wave of institutional buying that already included a 45% position increase by Swiss Life Asset Management in the prior quarter. Yet even as the company posts eye-popping revenue growth and clears its balance sheet of debt, the stock’s vertiginous ascent is setting off alarm bells among valuation watchers.

The numbers behind the rally are staggering. Revenue for the third fiscal quarter surged 251% year over year to $5.95 billion, while earnings per share hit $23.41, crushing analyst estimates. Gross margin swelled to nearly 79% on booming demand for NAND flash memory tied to artificial intelligence applications. The resulting free-cash-flow bonanza allowed SanDisk to completely repay its outstanding debt, earning a credit-rating upgrade from S&P. The company now sits on $3.7 billion in cash and has a $6 billion share-repurchase program in place. Production for the current year is essentially sold out.

But beneath the surface, cracks are forming. The headline revenue jump came entirely from higher prices and a richer product mix; actual shipment volumes dropped by a double-digit percentage. And the fourth-quarter outlook suggests that pricing momentum is already fading. Once industry-wide capacity expansions come online in 2027 and 2028, margins could come under intense pressure from a potential oversupply of NAND flash. Cooling demand from the data-center segment adds another layer of risk.

These mixed signals are playing out in the stock’s latest price action. After climbing more than 400% since the start of the year, SanDisk shares have entered a sharp consolidation. On Friday the stock closed at $1,407.61, down roughly 10% on the week. The relative-strength index sits at 79.5, deep in overbought territory. The gap to the 50-day moving average of $921.73 remains more than 50%, a stretched condition that often precedes further pullbacks.

The divergence between SanDisk’s operational strength and its market price is stark. Valuation models peg the stock’s fair value at about $265, implying an overvaluation of roughly 430% based on the latest closing level. The price-to-earnings ratio of 46.3 towers above the global technology sector average, although it stays below the industry median of 67.7. Analysts on Wall Street remain largely bullish, with Cantor Fitzgerald rating the stock “Overweight” and a $1,800 target, while Evercore has an “Outperform” rating and a $1,400 target. The consensus range spans $1,065 to $1,421.

For now, the bulls argue that earnings expectations are rising faster than the share price, keeping the valuation argument alive. But the technical setup is flashing warning signals that even a legendary hedge-fund entry cannot erase. With the next major support zone near $922—the 50-day moving average—SanDisk faces a critical test of whether its AI-driven growth story can justify a price that has long since left its intrinsic value behind.