AMD and SanDisk both tumbled roughly 9% last week despite delivering strong quarterly results, but one investor sees sharply different prospects for the two chipmakers.
James Foord, economist and leader of The Pragmatic Investor, has turned bearish on AMD while maintaining a bullish stance on SanDisk. According to TipRanks, Foord argues that AMD's explosive AI-driven revenue growth has yet to translate into the margin expansion investors expect, whereas SanDisk's new contract structure could fundamentally reduce the cyclicality of its NAND memory business.
AMD's growth story hits a margin wall
AMD reported record second-quarter revenue of $11.54 billion, up 50% year over year, with adjusted earnings of $1.66 per share. Data center revenue more than doubled to $6.72 billion, fueled by demand for EPYC processors and Instinct accelerators. Yet the company guided third-quarter adjusted gross margin to remain flat at 56%, a figure that disappointed investors who had bid up the stock ahead of earnings.
“The margin problem is the new bear case,” Foord said. He believes AMD's shift from selling individual accelerators to rack-scale systems adds networking, integration, and other costs, potentially capping the operating leverage that typically accompanies surging AI sales.
Wall Street has taken notice. William Blair analyst Sebastien Naji said the quarter left “much to prove,” citing intense competition and the need for AMD's Helios platform to ramp and gain accelerator market share.
SanDisk's contract backlog could rewrite the memory playbook
SanDisk's fiscal fourth-quarter results were striking: revenue surged 372% year over year to $8.97 billion, adjusted EPS reached $39.25, and non-GAAP gross margin climbed to 84.6%. Data center revenue doubled sequentially to nearly $3 billion. However, the company guided September-quarter gross margin to 83%–85%, suggesting profitability may be nearing a plateau.
Foord sees the pullback as an opportunity. “SanDisk is a Strong Buy today,” he said, according to TipRanks, pointing to the company's New Business Model agreements. SanDisk now has eight customers under these agreements, with $93.9 billion of minimum contracted revenue at floor pricing. About half of fiscal 2027 bits and roughly two-thirds of fiscal 2028 bits are already committed.
JPMorgan analyst Harlan Sur said the results point to stronger earnings power, lower cyclicality, and more durable fundamentals. Raymond James analyst Melissa Fairbanks raised her SanDisk price target to $2,000 from $1,470, citing AI data center demand and the new contract model's potential to improve earnings visibility, pricing discipline, and margin resilience.
Different tests ahead
AMD still has catalysts. EPYC demand remains robust, Instinct deployments are expanding, and the Helios rack-scale platform could strengthen its challenge to Nvidia. If those products drive market-share gains and margin expansion, Foord's bearish case could weaken quickly.
SanDisk faces the opposite burden of proof. RBC Capital Markets analyst Srini Pajjuri warned that investors may remain skeptical about floor pricing until the agreements are tested through a weaker memory environment.
For investors, the divergence highlights the importance of looking beyond headline revenue growth. AMD's margin stagnation is a red flag for some, while SanDisk's contract visibility offers a potential shield against the memory industry's historical boom-and-bust cycles. As the AI trade cools, these distinctions could drive stock performance in the coming quarters.
This article is for informational purposes only and does not constitute financial advice.
