Sandisk (SNDK 3.56%) stock is in a three-day slump.
Spooked by reports that Korea might want to tax AI profits earlier in the week, Sandisk shares sold off Tuesday -- and then kept on going down. Shares of the company, which specializes in producing NAND flash memory for use in artificial intelligence, slipped another 4.3% through 10:55 a.m. ET Thursday.
And there doesn't seem to be any bad news to explain it.
Image source: Getty Images.
Good news from China
The contrary, actually.
Over in China, Nvidia (NVDA +3.68%) CEO Jensen Huang accompanied President Trump on his visit to meet with President Xi Jinping, and announced a deal that will permit it to ship H200 artificial intelligence chips to the Middle Kingdom. Logically, more AI chips on the market implies more demand for computer memory to support them -- which should be good news for Sandisk, not bad.
Viewed in this context, it's a bit strange to see Sandisk stock falling today, except for one thing.
NASDAQ: SNDK
Key Data Points
One thing about Sandisk
Not to put too fine a point on it, but the thing that concerns me most about Sandisk isn't demand for its NAND -- that seems firmly on the upswing. What worries me about Sandisk is the price investors are paying for this growth.
Sandisk shares cost more than 53 times trailing earnings even after their sell-off, and the price-to-free cash flow ratio looks even more expensive at 66x. Granted, with earnings expected to more than triple next year (and FCF to more than double), and keep growing into 2028, Sandisk stock might still be "worth it."
There's just a lot riding on assumptions that Sandisk profits will keep growing, and not succumb to the usual boom-and-bust slump of a cyclical semiconductor stock. Caveat investor.
