Investor flees AMD, buys SanDisk after both stocks fell 9%

Both AMD and SanDisk fell about 9 percent after strong earnings, but economist James Foord sees opposite opportunities in the two chipmakers.

AMD and SanDisk both slid about 9 percent after beating estimates, yet economist James Foord is selling the GPU maker and buying the memory company, betting the storage upcycle outlasts AI chip competition.

Foord, economist and leader of The Pragmatic Investor, said the two stocks now offer opposite risk-reward profiles. He is bearish on AMD, which trades at 63 times forward earnings against an industry average of 24 times, and bullish on SanDisk, whose long-term contracts guarantee $93.9 billion in minimum revenue.

AMD's second-quarter revenue rose 50 percent year over year to $11.54 billion, beating the $11.28 billion consensus, with data center sales up 107 percent to $6.70 billion. Adjusted earnings per share of $1.66 topped the $1.62 estimate. SanDisk's revenue jumped 372 percent to $8.97 billion, beating the $8.394 billion consensus, with gross margin surging to 84.6 percent from 26.4 percent a year earlier.

The split reflects a broader repricing of the semiconductor sector, where the Philadelphia Semiconductor Index has drawn down about 30 percent from its peak. AMD's guidance of about $13 billion for the current quarter missed the most optimistic $14 billion projections, while SanDisk's $10.55 billion outlook fell short of the $11.1 billion consensus. Both missed on expectations, but Foord argues the memory maker's floor-price contracts protect downside in a way AMD's competitive position against Nvidia does not.

AMD's Multiple Leaves No Room for Error

AMD's stock, up 123 percent year to date and 177 percent over 52 weeks, reached a high of $584.73 on June 30 before the earnings-driven slide pushed it below $500. The company's data center business now accounts for 58 percent of revenue, and it is preparing to ship Helios, its first rack-scale AI system, which competes directly with Nvidia's Grace Blackwell and Vera Rubin platforms. Meta and OpenAI are among the first customers.

Wall Street remains bullish, with Argus Research raising its target to $625, Rosenblatt to $700, and Wells Fargo to $700. The consensus target of $603.10 implies about 25 percent upside, and the Street-high target of $1,250 suggests more than 160 percent. Foord's concern is that the forward multiple of 63 times already prices in flawless execution against a dominant rival.

SanDisk's Contracts Rewrite the Cycle

SanDisk's New Business Model, unveiled on its earnings call, extends visibility from three months to more than four years. The company has signed 10 contracts covering eight strategic customers, with weighted average duration exceeding four years and $16.5 billion in financial guarantees. The model is expected to cover more than half of fiscal 2027 shipments and about two-thirds of fiscal 2028 shipments.

The contracts convert NAND, a historically volatile commodity, into a business with software-level margins and guaranteed minimum revenue. Even if spot prices fall, SanDisk is backed by roughly $20 billion in annual guaranteed revenue. The bears counter that ceiling prices cap upside during booms and that locking in capacity at the cycle peak reduces pricing flexibility, but Foord argues the floor protects the downside that matters.

The divergence comes down to what the market is pricing. AMD's valuation assumes it keeps taking share from Nvidia in a cooling AI capex cycle, while SanDisk's contracts assume the memory upcycle lasts into 2027 and beyond. SanDisk's investor day on Aug. 13 will test whether management can defend the floor prices and margins behind its $93.9 billion backlog.

This article is for informational purposes only and does not constitute investment advice.