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AI Memory Boom Cracks? Sandisk Stock Plunges 14%
7 Jul
Summary
- Sandisk stock dropped 14% on July 2nd, impacting other memory chip makers.
- Meta's plan to sell AI compute capacity fueled fears of easing shortages.
- Sandisk's business remains strong with nearly doubled revenue and a $42B backlog.
On July 2, Sandisk experienced a significant 14% stock decline, with its shares closing at $1,745. This downturn was not isolated, as it affected the broader memory chip industry, including stocks like Micron, Samsung, and SK Hynix. The sell-off was primarily instigated by reports of Meta Platforms intending to lease its surplus AI computing capacity.
This development stoked concerns that the high demand for AI hardware might be easing, leading to a market reset after a period of rapid gains for memory stocks. However, Sandisk's own business metrics do not indicate a weakening market. The company, which specializes in NAND flash memory for AI data centers, reported its third fiscal quarter revenue nearly doubled to $5.95 billion.
Further bolstering its position, Sandisk has secured multiyear supply agreements totaling approximately $42 billion in minimum contracted revenue. Management has also forecasted fourth-quarter revenue between $7.75 billion and $8.25 billion, signaling continued strong performance despite industry-wide volatility. This indicates that the recent stock dip may reflect valuation adjustments rather than a fundamental crack in AI demand.
