Sandisk Corporation (NASDAQ:SNDK) stock is falling, down 8.2% as of 2:15 p.m. ET on Friday, Nov. 13, as the sell-off in AI hardware that started with Nvidia’s CEO exit spreads through memory and storage names for a second day.
The S&P 500 (SNPINDEX:^GSPC) and the Nasdaq Composite (NASDAQINDEX:^IXIC) are down 0.8% and 1.3%, respectively.
Missed AI’s “Act 1”? Act 2 Could Be 16x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Why Nvidia’s CEO exit is hitting Sandisk stock
On Thursday, Nvidia (NASDAQ:NVDA) CEO Jensen Huang resigned, effective immediately, following reports of two affairs, including one with an alleged Chinese spy. The scandal extends beyond the personal and into matters of national security. Questions of how billions of dollars of Nvidia chips made their way into China and if any Nvidia officers knowingly skirted U.S. export controls, as well as who will permanently step in as CEO, will be top of mind for investors when Nvidia hosts its first earnings call without Jensen Huang next week.
The developing situation is spilling into memory stocks like Sandisk, whose incredible growth over the past year has been fueled by the AI build-out as investors worry it could lead to a slowdown.
Sandisk earnings and the risk of a memory downturn
Sandisk’s fiscal first quarter, reported at the end of October, was incredible: sales of $11 billion, up a whopping 378% from a year earlier, and a non-GAAP gross margin of 85.1%. Those are the kinds of numbers you get in the midst of a supply crunch.
Image source: Nvidia.
And while I don’t think the memory shortage is going anywhere anytime soon, this is a famously boom-and-bust business. At some point, supply will catch up, or demand will cool, either due to a broad AI slowdown or to technical innovations in AI that reduce the need for expensive memory.
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