Sandisk (SNDK +6.21%) stock closed out Wednesday's daily trading session in the red despite having been up big earlier in the day. The company's share price closed out the day down 0.3%, but it had been up as much as 7.2% close to the market open. Meanwhile, the S&P 500 ended the day down 1.6%, and the Nasdaq Composite fell 2%.
Sandisk stock actually surged early in today's session as investors bet on its strong outlook in the artificial intelligence (AI) memory tech market, but it lost ground as the market became more worried about the inflation outlook. With today's modest valuation pullback, the stock is still up 592% year to date as of this writing.
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Inflation concerns spurred a valuation reversal for Sandisk
The Bureau of Labor Statistics published its Consumer Price Index (CPI) report for May this morning, and the report showed that inflation accelerated again last month. The 4.2% annual CPI increase was in line with the level forecasted by economists, and the 0.2% sequential increase for core CPI actually came in below the forecasted increase of 0.3%. On the other hand, the report still showed a meaningful increase for inflation -- and geopolitical dynamics have investors worried that the picture could worsen.
NASDAQ: SNDK
Key Data Points
Will the Iran war put an end to Sandisk's incredible rally?
Over the last year, Sandisk stock has rallied roughly 3,840% -- an absolutely incredible return across a relatively short period of time. The stock's massive rally has been powered by surging demand and soaring pricing power in the memory technologies market in connection with the rise of AI technologies -- but that doesn't mean the company's valuation is immune to macroeconomic and geopolitical catalysts.
Recent comments from President Donald Trump suggest that the U.S. is poised to amplify its strikes on Iran, potentially pushing the timeline for a resolution to the conflict further out. Investors are worried that a protracted conflict will push energy prices higher for longer, add to inflationary pressures, and make it more likely that the Federal Reserve will hike interest rates. If those scenarios were to play out, it could significantly dampen the market's appetite for high-flying tech stocks.
