Two things characterise the current stock market. Great fundamentals and mostly falling share prices. My favourite bellwether, the stock SanDisk, at one stage had more than halved from the peak. You might imagine that the company was getting ready to file for bankruptcy, but business is booming.
A year ago, Datacenter represented roughly 12% of our bits. Exiting fiscal year ’26, it represents 38% of our portfolio and is our fastest-growing end market. Our technology leadership also extends well beyond Datacenter. Edge remains a large and strategically important end market for Sandisk, spanning smartphones, PCs, tablets and an expanding set of emerging use cases in the realm of physical AI, including automotive, robotics and on-device agentic AI. Near term, both PCs and smartphones are working through a period of adjustment as demand is shifting towards AI-enabled devices and premium configurations, driving higher storage content, particularly in smartphones.
The demand background is amazing.
I think one of the most interesting dynamics is some of our biggest customers are already coming back and wanting more, right, from just what they thought they needed 3 months ago. It’s a very, very robust demand environment, especially in the Datacenter. So we feel good about where we’re at. But we’re getting a lot of the portfolio spoken for at this point, and we’ll be selective from here about how we add to it. But we’re definitely still in deep conversations with additional customers.
SanDisk is presently valued at around $186bn with annualised sales already running over $40bn and incredible profitability.
The key numbers here are the ones highlighted in red. Turnover of almost $9bn produced operating income of $7.1bn and free cash flow of $5bn. SanDisk is generating an annualised $20bn of free cash flow, which is more than 10pc of its market value. No wonder the company is increasingly thinking that its best use of cash is to buy back its own shares.
Moving on to capital allocation. Our priority remains to invest in the business to support long-term growth and durability. We will continue returning cash to shareholders. Sandisk’s Board of Directors has authorized an additional $14 billion share repurchase program, bringing our total remaining authorization to $15.5 billion.
I could go on about all the memory stocks and another favourite, Advanced Micro Devices, which reported great numbers and incredibly exciting prospects, so, naturally, the shares fell sharply. I think what is happening is a massive amount of pent-up profit taking which will eventually work through the system and allow all these shares to start climbing again.
Meanwhile, some other shares in the AI trade are looking bouncier.
With the benefit of hindsight, we could say, looking at this chart, that after a massive chart breakout in 2016, the shares have been in an incredible bull run, discounting the massively favourable trading background we are now experiencing.
Jensen Huang could not be more bullish.
Speaking about the shift from human-driven computing to agentic systems, Huang argued that Nvidia’s addressable market is being redefined at the endpoint level. “These are now processing AI’s for humans to collaborate with. In the future we have AI agents and robots and they will be using computers. Instead of a billion people using computers we will have 100 billion agents and billions of robots all using computers. The computer industry built on top of the chip industry is certainly not big enough,” Huang said. His projection follows: “My guess is the semiconductor industry will probably have to be 10 times larger than it is today over the next decade or so. Working with our partners in Korea and around the world to scale up the supply chain of semiconductors so we are prepared for the AI future.” Huang framed the 10x figure explicitly as his personal guess, not a certainty.
Against this background, whatever is happening to these shares and others in the AI trade presently, they are likely to be multiples higher a decade from now.
Another share proving the sceptics wrong is Palantir.
Palantir’s business is booming in the US but struggling in the UK because super-woke Europeans find Alex Karp hard to take. Naturally, I like Alex Karp and what he stands for, as a lady sitting next to me on the bus discovered when she revealed her pride in being a socialist. She was left in no doubt that my spiritual mentor is Adam Smith, not Karl Marx. She was a feisty lady who could fight her corner, despite being so obviously wrong, so we parted friends.
It is extraordinary that with examples like North Korea and Cuba around, people persist with this Socialist c**p, but they say there is one born every minute. My lady friend was a good person. I am not a good person; I try to look after number one, and once my needs are satisfied, I may spare a thought for my nearest and dearest. What this idealistic lady failed to grasp is that most people are like me, not her, and all your socialist planning needs to take that into account. At which point enter Adam Smith, who has found a way for us all to be selfish while doing the greatest good for the greatest number. Capitalism is a genius system if only people had the sense to give it a chance.
Socialism is exactly the opposite. People who think they know better try to tell everybody how to behave so that everybody can be happy and soon find that this kind of bossiness can only be achieved at the point of a gun, which leads inexorably to general misery, except for a few hypocritical boss types running the show.
A good rule for any political system (take note, Iran) is that if you can only make it happen by threatening to shoot people, it is a bad system.
Back to Palantir, which is an insanely successful business, nearly doubling in size annually and quadrupling profits in just the last year. This is difficult for socialists who think all profits are money stolen from the pockets of the people. On the contrary, profits are what determine the efficient allocation of capital in a way which benefits everybody. Socialism has no way of allocating capital and is always chasing yesterday’s conventional wisdom. It is a formula for ossification.
Listen to Zack Polanski, leader of the Greens, on Palantir.
“I have today handed a letter to Palantir serving it notice to pack its bags and get the hell out of the NHS.
“This Trump supporting military surveillance outfit has no place in Britain’s most important institution. The NHS cares for patients and brings our country together. Palantir’s most recent history is to actively aid and abet genocide in Gaza and to provide surveillance data for Trump’s paramilitary ICE squads, currently causing death and mayhem on the streets of America.
No meeting of minds there then. The problem for Polanski and co. is that somebody has got to make some money to pay the taxes that keep the NHS afloat. Without Palantir and companies like it, governments would have to shut down. It is the hated capitalists that fund their socialist aspirations.
Karp describes Palantir as the greatest software company in history. Who am I to know whether he is right or not, but his claim is certainly not absurd. By any standards, Palantir is an amazing company, and it is doing something most important, helping companies, governments and the defenders of the free world to harness AI to do their job. The shares are broadly marking time after a huge rise between 2023 and 2025, but eventually they should start climbing again.
Stand back for a moment and consider how amazing Palantir’s business is.
We generated a record $764 million in U.S. commercial revenue this quarter—a 149% year-over-year increase. Such an achievement would be cause for astonishment in any business; for one of our size, scale, and consequence, it is simply staggering.
On a quarter-by-quarter basis, our U.S. commercial business grew 28%. Such growth—indeed, such acceleration—gives the impression that what others might require a year or even longer to achieve, we can do in 90 days.
And it must be noted that we have achieved these results with a miniscule and shrinking sales headcount, another way in which we have discarded conventional wisdom in favor of our own, unique path.
While our U.S. commercial business is on fire, we believe it is nonetheless just nascent.
I am sure he is right. While Polanski is all waffle and hot air, Karp is out there doing something that really helps the world. How classic that Polanski hates Palantir and all its works so much and justifies that hatred by lying about the business, describing Palantir in a way that exists only in his mind, as though they are some bunch of Bond villains. Amazingly, there is enough sympathy for this point of view in Europe that while growing explosively in America, Palantir struggles to make progress in Europe. Why didn’t I go and live in America years ago?
Share Recommendations
Companies involved in the AI trade, including Nvidia, Broadcom, Credo Technologies, Advanced Micro Devices, Micron Technology, SanDisk, Seagate Technology, Western Digital Corporation, and plenty more I have not mentioned here.
