SanDisk (SNDK) vs. Seagate (STX): Which Storage Stock Is the Better Buy Right Now?

The AI trade is moving beyond GPUs. As AI models become more capable, they also generate, process, and retain massive amounts of data. That is creating a less glamorous but increasingly important question for data centers: where does all that data go?

SanDisk Corporation (NASDAQ:SNDK) and Seagate Technology Holdings plc (NASDAQ:STX) offer two very different answers. SanDisk is benefiting from growing demand for NAND flash and enterprise SSDs, while Seagate is betting that the sheer volume of AI-generated data will keep driving demand for high-capacity hard drives.

Both have strong AI tailwinds. But the stocks are telling very different stories.

DON’T MISS: Will SanDisk (SNDK) Ride the Next Wave of AI-Driven NAND Demand?

SanDisk is riding a changing storage mix

SanDisk Corporation’s biggest opportunity is that AI inference is making storage more important. CEO David Goeckeler described AI as a “memory-centric, storage-intensive problem,” with every interaction creating data that needs to be stored, retrieved, and served quickly. Data center already accounted for 38% of SanDisk’s portfolio at the end of fiscal 2026, up from roughly 12% a year earlier.

The company is also trying to make its earnings less dependent on the notoriously volatile NAND cycle. SanDisk now has eight long-term business agreements with customers, with a weighted average duration of more than four years. Management expects these contracts to cover more than half of its fiscal 2027 bits and roughly two-thirds in fiscal 2028.

That matters because SanDisk isn’t simply hoping AI demand remains strong. It is increasingly locking in customers and supply commitments ahead of time.

READ ALSO: Seagate (STX) Retired its 2028 Notes. Was the Cash and Share Cost Worth it?

Seagate is making the case for hard drives

Seagate’s opportunity is different. AI does not just require fast storage. It creates huge amounts of data that companies need to keep.

CEO Dave Mosley argued that AI is causing data to compound because companies are retaining more information for historical context, compliance, and future reuse. Seagate also sees newer workloads such as agentic AI and physical AI creating additional storage demand.

That is important because hard drives remain the mass-storage layer in many data centers. Seagate’s data center business now represents about 90% of its exabyte shipments, and its long-term supply agreements have already allocated the vast majority of nearline capacity into 2028.

Its HAMR technology is another part of the story. Rather than simply selling more drives, Seagate is increasing how much data each drive can hold. Management believes this can support mid-20% exabyte growth without a comparable increase in drive units, improving capital efficiency along the way.

The valuation gap is hard to ignore

This is where the comparison gets interesting.

SNDK trades at just 8.04x forward earnings, compared with 25.71x for Seagate Technology Holdings plc (NASDAQ:STX). On the surface, SanDisk looks dramatically cheaper.

But that gap reflects more than investor sentiment. SanDisk is coming off an extraordinary earnings ramp, while Seagate has already demonstrated substantial margin expansion, pricing power, and free-cash-flow generation. Seagate’s non-GAAP operating margin reached 44.6% in its latest quarter, while free cash flow exceeded $1.1 billion.

So the real question is whether SanDisk’s rapidly expanding earnings can make today’s low multiple meaningful, or whether Seagate deserves a premium because its revenue and cash flow are becoming more predictable.

Which stock is the better buy?

At these prices, SNDK looks more compelling. Seagate has a strong business, an impressive HAMR roadmap, and increasingly visible demand from hyperscalers. But at 25.71x forward earnings, investors are paying a substantial premium for that visibility.

SanDisk is much more exposed to the volatility of NAND, but its business is changing quickly. Data center is becoming a much larger part of the company, long-term customer agreements are improving visibility, and management is expanding supply through technology rather than simply throwing more capital at factories.

The key is that 8.04x forward earnings gives SanDisk considerably more room for its earnings growth to surprise investors. Seagate may offer the steadier story, but SanDisk offers the more interesting combination of AI-driven growth, improving visibility and valuation.

Market Sentiment

Hedge fund interest in Seagate Technology strengthened significantly in Q2. The number of hedge funds holding the stock rose from 93 in Q1 to 131 in Q2, while the total value of their positions jumped from approximately $6.08 billion to $17.60 billion.

Hedge fund interest in SanDisk also strengthened. The number of hedge funds holding the stock increased from 114 in Q1 to 128 in Q2, while the total value of their positions more than doubled from approximately $11.36 billion to $25.59 billion.

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This article is originally published at Insider Monkey.