Shares of memory-chip juggernaut Sandisk (SNDK +6.03%) were pulling back last month in line with a broader sell-off in the memory and AI infrastructure sectors as investors reassessed these stocks on fears that hyperscalers were overspending on capital expenditures.
Additionally, the launch of China's new AI model and an IPO spooked investors, as some feared it could drive down prices for crucial components like memory. The Information also reported that Anthropic was developing its own AI chip, potentially making it a competitor with Sandisk.
According to data from S&P Global Intelligence, the stock finished the month down 47%.
As you can see from the chart below, the stock slid over the course of the month, overindexing against a broader sell-off in chip stocks, as shown by the decline in the VanEck Semiconductor ETF.
What happened with Sandisk
There was little company-specific news out on Sandisk last month, but the stock was moving with the broader sentiment around AI and memory chips, and after the stock finished the first half of the year up more than 800%, a combination of profit-taking and uncertainty around the AI cycle sent the stock falling last month.
Among the news that pushed Sandisk stock lower last month was SK Hynix missing bottom-line estimates in its first earnings report since its U.S. listing, sending memory stocks pulling back on fears that analyst forecasts had gotten ahead of reality.
Investors also seemed skeptical that the massive capital expenditures by hyperscalers were sustainable. Alphabet's (GOOG +4.44%) (GOOGL +4.88%) , for example, reported negative free cash flow for the first time ever in its second-quarter report.
Finally, the launch of the Kimi K3 model seems to underscore the risk of China competing with Sandisk, as Apple asked the government to allow it to buy memory chips from blacklisted Chinese companies. Last month also saw the IPO of CXMT, a Chinese memory chip company with a market cap of around $500 billion and the financial strength to compete with U.S. rivals.
Image source: Getty Images.
What's next for Sandisk
Sandisk's product portfolio is more limited than that of its larger peers like Micron, as it sells flash memory and data storage products. That limited focus has made it even more exposed to industry dynamics in memory, as it has outperformed its peers during the shortage.
Sandisk's profits are expected to continue to climb through at least next year, a sign that memory prices will go even higher. Investors should keep that in mind as the volatility in the stock is likely to continue. There's still a lot of uncertainty around the memory cycle, especially for smaller players like Sandisk.
