Storage shares rallied on Wednesday. Rambus up 13%; Western Digital, Micron up around 4%; SanDisk up over 3%; Seagate Technology up 2%.
Citi reiterated a Buy rating for Sandisk stock and bumped its price target to $490 from $280.
Demand for memory and data storage remains strong, Citi said, and the long-term transition from training artificial-intelligence models to inferencing -- applying those models to data -- will only help. Coupled with limited supply, Sandisk has the perfect conditions to expand its profit margins.
"The company continues to see unconstrained demand in the mid-20s% growth rate," wrote Citi analyst Asiya Merchant. "Sandisk is making no changes to its supply decisions in the current dynamic environment, instead striving for a balance of short-term profitability and long-term positioning."
Other memory and data-storage names may be better picks, however, given Sandisk's stock's meteoric rise over the last year, Citi said. In particular, the firm favors makers of hard disk drives, such as Western Digital and Seagate Technology, which have more room to grow as drive prices rise.
But Sandisk remains on Citi's short-term upside watch ahead of its quarterly earnings report on Jan. 29. And the favorable supply-and-demand dynamic that has made it such a popular stock is set to persist through 2027, the firm said.
Nvidia's new Rubin chip is one reason for the frenzied rush into Sandisk stock. Nvidia discussed a memory storage platform for the chip at the CES conference earlier this month, which would add more flash storage to AI infrastructure.
"More SSD demand for these systems would imply even tighter supply than we have right now, further boosting SNDK's pricing," Morningstar analyst William Kerwin said at the time.
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