Monday was not a fun day to own Sandisk (SNDK +10.84%) stock, which crashed 13% on worries about the durability of demand (and high prices) for computer memory chips.
Monday was not fun... but Tuesday is looking better, with Sandisk stock up a healthy 6% through 11:45 a.m. ET.
Image source: Getty Images.
Good news for Micron is good news for Sandisk, too
And why is Sandisk up today? Well, the most obvious catalyst is a note that KeyBanc just published on Sandisk rival Micron (MU +7.61%). As the banker explains, in a note covered on TheFly.com, visits to artificial intelligence data center sites in Asia confirm demand remains strong both for AI chips and for the high-bandwidth memory (HBM) chips that help AI systems answer user questions.
Supply shortages in both DRAM and NAND memory chips for AI customers continue to force DRAM and NAND prices higher. For now, KeyBanc seems to think Micron will be the bigger beneficiary (Micron makes both DRAM and NAND), and is raising its price target only on that stock (but not on Sandisk stock -- which only makes NAND).
Still, KeyBanc specifically noted that deficits exist in both DRAM and NAND.
NASDAQ: SNDK
Key Data Points
What this means for Sandisk stock
So that makes this good news for both Micron and Sandisk.
That said, I'd urge investors to be cautious with this stock. Sandisk shares already look pricey at more than 57 times trailing earnings. That P/E ratio could get smaller if NAND prices continue to skyrocket and profits balloon -- but it could also get larger (i.e., the stock will look more expensive) if increased NAND production ends the supply deficit sooner than expected, or if customers start using their memory more efficiently.
Until investors figure out which scenario is more likely, expect Sandisk's share price to continue gyrating dramatically.
