Investors are keenly eyeing two companies poised for continued growth: Sandisk and Taiwan Semiconductor Manufacturing Company (TSMC). Despite notable stock performances this year, both companies are deemed attractive for additional investment, thanks to their promising outlooks and favorable valuations.
Sandisk has witnessed a remarkable surge, with its stock price more than doubling. Yet, the company’s shares continue to be regarded as undervalued, trading at a forward price-to-earnings (P/E) ratio of 15 for the fiscal year 2026 and below 8 times for fiscal 2027 estimates. Sandisk is currently benefiting from a NAND memory supercycle that appears to have no end in sight.
In recent years, the NAND memory market faced a downturn as companies overproduced in response to heightened demand during the pandemic. This led to an oversupply, forcing manufacturers to sell their inventory below production costs, prompting significant production cuts and a strategic shift toward dynamic random-access memory (DRAM). However, a special type of DRAM, known as high-bandwidth memory (HBM), began to thrive due to its essential role in artificial intelligence (AI) data centers, temporarily sidelining NAND.
The landscape has drastically shifted; AI data centers are now in urgent need of high-performance solid-state drives (SSDs) powered by flash memory, subsequently fueling a newfound demand for NAND. As production lines had been scaled back, prices for NAND surged, generating rising sales and improved gross margins for Sandisk. With competitors focused primarily on HBM and not inclined to revert to NAND production, Sandisk is well-positioned for sustained revenue growth and robust margins, indicating substantial potential for stock appreciation.
Taiwan Semiconductor Manufacturing Company (TSMC), despite trading near historical highs, remains an appealing investment option with a forward P/E ratio around 26. This valuation is particularly attractive given TSMC’s crucial role in the burgeoning AI infrastructure sector.
Known as the world’s largest foundry, TSMC has differentiated itself by successfully producing advanced logic chips, including graphics processing units (GPUs), with minimal defects. This unique capability has solidified its position as an indispensable partner for chip designers, granting TSMC significant pricing power in an increasingly competitive landscape.
The demand for AI chips is projected to soar, with TSMC estimating an annual revenue growth rate of over 50% through 2029. This strong demand trajectory, combined with TSMC’s strategic advantages, makes the stock a compelling option for investors, even as it nears its all-time highs.
In summary, both Sandisk and TSMC present promising investment opportunities amid growing demand driven by advancements in technology and artificial intelligence, coupled with favorable valuations that make them attractive for portfolio additions.
