Better Buy: Sandisk or Nvidia Stock?

Nvidia's GPU business is a bit more stable than Sandisk's NAND business.

Nvidia (NASDAQ: NVDA) has become a staple investment amid the artificial intelligence (AI) build-out. Its returns have made many investors richer, and the company's future still looks bright. However, now and again, a shiny new toy comes along that makes investors look away, and recently, that has been Sandisk (NASDAQ: SNDK) . The memory-chip maker has delivered unbelievably high returns in a short time frame, rising 4,500% in the past year. That's about the same total return that Nvidia has provided since 2020.

The question is, has Sandisk been a flash in the pan, or is it a real, long-term alternative to investing in Nvidia?

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Nvidia makes graphics processing units (GPUs), which have been widely deployed throughout the AI build-out. GPUs are highly flexible parallel processors, capable of efficiently handling workloads that involve massive amounts of data, and that makes them fantastic for training and running AI models. Nvidia's position at the top of the AI accelerator food chain has transformed it into the world's largest company, and there are few signs that its dominance will fade.

Sandisk makes NAND memory, which is primarily used in solid-state drives (SSDs) in data center applications. There are other uses for NAND memory, but soaring data center demand is what's causing the stock to outperform. Essentially, there is a massive demand for SSDs and other types of products that utilize memory chips. It takes a few years to build new memory-chip foundries, so production hasn't yet caught up with demand, and memory prices have soared as a result. Sandisk's revenue and profits have as well, turning the stock into an absolute rocket ship.

The question is, how long will these levels of memory and GPU demand last? That's an impossible question to answer, and makes the future somewhat uncertain.

However, Sandisk doesn't control its destiny. Its future is entirely tied to how much companies are willing to pay for memory. There isn't a whole lot of difference between one company's SSDs and a competitor's, so there isn't as much incentive to innovate, and memory is largely treated as a commodity. By contrast, Nvidia can continue to create competitive advantages for its processors and keep its products priced at a premium relative to rival chips, so it has an edge here.