Shares of Sandisk (SNDK +8.57%) charged sharply higher on Friday, jumping as much as 8.9%. As of 11:02 a.m. ET, the stock was still up 8.5%.
The semiconductor specialist rallied on news of a notable acquisition by an artificial intelligence (AI) peer.
Image source: The Motley Fool.
Let the chips fall where they may
Rumors have run rampant in recent days that Nvidia (NVDA +1.55%) was courting open-source AI and machine learning development platform Hugging Face. The speculation was put to bed late yesterday when the chipmaker confirmed the acquisition.
Nvidia will pay $12.9 billion for the AI model platform, in what many are calling a defensive move. In a blog post, Nvidia noted that Hugging Face has extensive reach in the AI developer community, boasting more than 18 million users, 3 million models, 500,000 data sets, and more than 1 million applications. Moreover, "more than 200,000 companies use the platform to discover, evaluate, customize, and deploy AI."
Furthermore, CEO Jensen Huang noted that more than half of Nvidia's sales are "largely driven by open models." Indeed, the company is already the largest contributor of open models and data to Hugging Face, so Nvidia is taking the relationship to the next level.
NASDAQ: SNDK
Key Data Points
So, what does this have to do with Sandisk?
While the connection is tenuous, it is meaningful. Nvidia's chipmaking business has been supercharged over the past few years by the broad adoption of generative AI and the ongoing development of AI agents. Demand for Nvidia's graphics processing units (GPUs), which are critical to running AI in data centers, has also fueled demand for Sandisk's NAND flash memory chips, which are also crucial components.
Generally speaking, what's good for Nvidia is also positive for Sandisk, which is why the Hugging Face acquisition is driving Sandisk stock higher today.
On an unrelated note, it didn't hurt that during its earnings call earlier this week, Dell Technologies COO Jeffrey Clarke said that the supply imbalance for AI servers came down to one thing: memory. "The constraints remain the same," he said. "DRAM, DRAM, DRAM, followed by NAND, NAND, NAND."
And at 23 times earnings and just 8 times forward earnings, Sandisk stock is still attractively priced.
