When investors think about the artificial intelligence trade, names like Nvidia, Microsoft, and Meta typically dominate the conversation. But in 2025, the S&P 500's best-performing stock wasn't a chipmaker building the processors that train AI models or a cloud computing giant deploying them—it was SanDisk, the venerable data storage company that returned to the public markets in February.

SanDisk shares surged an astonishing 559% from their February debut at $38.50 to close out 2025 trading near $252. The rally wasn't just remarkable in isolation—it handily outpaced every other member of the S&P 500, including Nvidia's 39% gain and Palantir's 340% advance.

The Perfect Storm: NAND Shortage Meets AI Demand

SanDisk's extraordinary performance resulted from a confluence of factors that few analysts anticipated when the company completed its spin-off from Western Digital in February 2025.

The NAND flash memory market, which had been in a prolonged downturn through much of 2023 and 2024, snapped back with remarkable force. A global shortage of high-performance memory chips emerged just as artificial intelligence workloads began demanding unprecedented amounts of fast, local storage.

"SanDisk gained 2 percentage points of NAND market share during the 12-month period that ended in June 2025," noted semiconductor industry analysts. "Industry leaders Samsung, SK Hynix, and Kioxia each lost at least 2 percentage points of market share during the same period."

The timing proved impeccable. As AI data centers expanded at breakneck pace, the demand for high-speed solid-state drives to store and retrieve training data exploded. SanDisk, freed from Western Digital's hard disk drive business, could market itself as a pure-play on this trend.

Data Storage: The Overlooked AI Play

The investment thesis for AI-related stocks has traditionally focused on the companies building the processors that perform AI computations. But as the industry has matured, a more nuanced understanding has emerged: AI systems are only as good as their ability to access and process massive datasets.

Every AI training run requires reading billions of data points from storage. Every inference operation—when an AI model generates a response or makes a decision—involves retrieving model weights and contextual information. The faster these storage operations occur, the more efficient the entire AI pipeline becomes.

SanDisk's NAND flash technology sits at the heart of this infrastructure. Unlike traditional hard drives, solid-state storage offers the random-access speeds and low latency that AI workloads demand.

The Magnificent Storage Trio

SanDisk wasn't alone in benefiting from the AI storage boom. The three best-performing stocks in the S&P 500 for 2025 were all data storage companies:

  • SanDisk: +559% (spin-off from Western Digital)
  • Western Digital: +282% (remaining hard drive and enterprise storage business)
  • Micron Technology: +239% (memory chip manufacturer)

The common thread connecting all three: artificial intelligence. Each company provides data storage and memory products that have seen robust demand due to the buildout of AI infrastructure.

Wall Street's Outlook for 2026

Despite the massive rally, some analysts believe SanDisk's run may have further to go. The AI-powered storage market is projected to grow from $30.27 billion in 2025 to $187.61 billion by 2035, representing a 20% compound annual growth rate.

Wall Street expects SanDisk's adjusted earnings to increase at 112% annually through the fiscal year ending in June 2028. Among 23 analysts covering the stock, the median price target stands at $280 per share—implying modest upside from current levels, though several analysts have higher targets.

The bull case rests on continued AI infrastructure expansion. As more companies deploy AI applications—from chatbots to image generators to autonomous systems—the demand for high-speed storage will only intensify.

Risks to Consider

Investors considering SanDisk at current valuations should be aware of several risks:

  • NAND pricing cycles: The memory industry is notoriously cyclical. The current shortage could give way to oversupply if manufacturers expand capacity too aggressively.
  • Competition: Samsung, SK Hynix, and other Asian manufacturers are investing heavily in next-generation memory technologies. SanDisk's market share gains may prove difficult to sustain.
  • AI demand sustainability: If the AI buildout slows or enterprise customers begin optimizing their storage architectures, demand could moderate.
  • Valuation: After a 559% rally, much of the good news may already be priced in. Any disappointment in earnings or guidance could trigger a sharp correction.

The Bigger Picture

SanDisk's 2025 performance offers a valuable lesson for investors: the AI trade extends far beyond the obvious beneficiaries. While Nvidia captured headlines and investor attention, the companies providing the infrastructure that AI systems depend upon—storage, networking, power delivery—often delivered superior returns.

As 2026 begins, the question is whether the data storage boom has room to run. If AI adoption continues accelerating, the companies that store the world's data may continue to outperform. But after the gains already achieved, finding the next SanDisk will require looking beyond the obvious plays to identify which infrastructure components remain underappreciated.

For now, SanDisk's 559% rally stands as the definitive example of how the AI revolution is reshaping markets in unexpected ways—and a reminder that the biggest winners aren't always the names that dominate the headlines.