Sandisk Corporation (NASDAQ:SNDK) and Western Digital Corporation (NASDAQ:WDC) are two of the strongest-performing stocks in today’s AI era. The two companies’ shares are up 455% and 159% year-to-date, respectively. Both of the firms’ shares have responded to the aggressive demand for their storage products stemming from the multi-billion-dollar artificial intelligence infrastructure buildout. However, Western Digital Corporation (NASDAQ:WDC)’s shares closed 13% lower and Sandisk Corporation (NASDAQ:SNDK) dipped by 6.8% on August 6th, the day Cramer made the following remarks. As part of his comments, the CNBC TV host also discussed Melius Research’s Ben Reitzes’ comments about Sandisk Corporation (NASDAQ:SNDK):
‘Western Digital, you know what they did not raise like I thought they would, Sandisk, they did not raise like I thought they would. You put them all up and they’re all the same. These are all the same stocks to some degree. They’re just momentum stocks, that people think, you know what, aren’t so good.
“Yeah and I read his, and you know, Ben’s been right about a lot of this stuff. And by the way, Ben came on to say this, everyone said that it had moved too much, and he just went right there and said, you should buy it, that was good. But this again, when I look over these, a lot of these guys have done LTAs, new business models. These are the things people talk about. And the LTAs are basically, look, we gave a contract to a manufacturer. And the first quarter’s not going to be as good but we’re no longer cyclical. I do like that. I do like that.”
Cramer comments about Western Digital Corporation (NASDAQ:WDC) came after the firm reported its fiscal fourth quarter earnings report. It posted $3.75 billion in revenue and $3.56 in earnings per share to beat analyst estimates of $3.69 billion and $3.30. However, as Cramer remarked, Western Digital Corporation (NASDAQ:WDC) did not impress investors with its guidance, even though its Q1 midpoint revenue guide of $4.1 billion was a hairline higher than analyst estimates of $4.04 billion, while $4 in profit per share guide was also higher. As for Sandisk Corporation (NASDAQ:SNDK), the firm’s revenue and profit of $8.97 billion and $39.25 per share beat analyst estimates of $8.39 billion and $34.45. It guided Q1 revenue to range between $10.30 billion and $10.80 billion and profit between $44 and $46 per share to also beat analyst estimates.
With the earnings out of the way, the debate for both of the firms is about their role in the AI buildout. While so far they have demonstrated robust performance, the bulls and the bears are torn between whether the recent growth is cyclical or structural in nature. The similarity in the narrative comes despite the fact that Western Digital Corporation (NASDAQ:WDC) is a player in the hard disk drive (HDD) market and Sandisk Corporation (NASDAQ:SNDK), a spinoff of WDC’s flash business, operates in the NAND flash sector. Western Digital Corporation (NASDAQ:WDC)’s low cost HDD are argued to be a great cost-effective medium to store the massive data required for AI, while Sandisk Corporation (NASDAQ:SNDK)’s long term business agreements and massive hyperscaler spending plans are argued by the bulls to inject certainty into the firm’s future.
On the flip side, Western Digital Corporation (NASDAQ:WDC) and Sandisk Corporation (NASDAQ:SNDK)’s bears argue that the production ramp ups from both firms could clash with the potentially cyclical nature of the market. Additionally, with Western Digital Corporation (NASDAQ:WDC) facing competition from Seagate, the bears point towards Q1 margin guidance range of 55% to 56% sitting below Seagate’s 57%.
Looking at hedge fund sentiment, 83 funds in Q1 had held a stake in Western Digital Corporation (NASDAQ:WDC) while 114 had held a stake in Sandisk Corporation (NASDAQ:SNDK). Similarly, the bearishness also appears to be stronger for Western Digital Corporation (NASDAQ:WDC) if the short interest is analyzed. As of July end, 8% of the float was short, while the figure was slightly lower for Sandisk Corporation (NASDAQ:SNDK) as it sat at 7.4%.
While Insider Monkey acknowledges the risk and potential of WDC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than WDC that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
