The latest sign of Sandisk's ascent: It's now bigger than the company that spun it off

By Emily Bary and Britney Nguyen

Last year's separation unlocked value for both Sandisk and Western Digital. Upbeat industry dynamics played a big part as well.

Sandisk is officially a $200 billion-plus company.

When Western Digital spun off Sandisk last February, the companies had market capitalizations of $17 billion and $7 billion, respectively.

Both companies have seen a dramatic increase in their market values since then - and now there's been a changing of the guard.

Sandisk (SNDK), worth $208.26 billion at Tuesday's close, is now worth more than its former corporate parent Western Digital (WDC), which finished the day with a $160.37 billion market cap.

Sandisk finds itself in the company of some storied American brands. It crossed the $200 billion market-cap threshold for the first time on Tuesday. Others with market values in that neighborhood include McDonald's (MCD) ($203 billion), Verizon Communications (VZ) ($198 billion) and PepsiCo (PEP) ($212 billion), according to Dow Jones Market Data.

The spinoff last year was intended to better unlock the respective value of the flash-storage components that Sandisk made and the hard-disk drives that Western Digital made. Sandisk's products played into a more volatile market landscape, but were perhaps not getting the investor appreciation they deserved while part of a diversified company.

The market climates for both flash and HDDs have been incredibly strong lately - driving Sandisk shares 2794% higher and Western Digital shares up 849% since the time of the corporate separation. The two companies, alongside players like Micron Technology (MU) and Seagate Technology (STX), have been able to dramatically increase prices as artificial intelligence has dramatically boosted demand for their offerings.

See also: Micron's stock soars as new report throws cold water on the bear case: 'This time is different.'

Supply shortages are expected to persist, supporting further elevated pricing in the months and perhaps years to come.

Sandisk said last week that it is shifting to a new business model of "multiyear customer engagements backed by firm financial commitments." These are expected to increase its earnings potential and reduce its volatility. The company secured three customer agreements in the last quarter, and has signed two more in the current June quarter, it said alongside its last earnings report.

Through the new setup, Sandisk and investors have more visibility into the business, Jefferies analyst Blayne Curtis said in Friday note. Altogether, the three deals from the March quarter "represent a minimum value" of $42 billion, which could "materially" increase as memory supply remains tight. He added that the agreements are "a strong signal that the hyperscalers are willing to sign these agreements" at high prices.

Bernstein analyst Mark Newman said that the commitments allow for "long-term stability," as lower cyclicality will lead to "attractive economics over a longer horizon" rather than just for one quarter.

Read: Optics is the next big AI bottleneck. This company could be an underrated beneficiary.

-Emily Bary -Britney Nguyen

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