AI chip concerns trigger stock decline for Sandisk, Micron, and SK Hynix

The broader technology sector is performing well, with the NASDAQ 100 up 0.3%, yet memory and storage stocks are an exception. This trend impacts Sandisk alongside other major memory producers that supply components for AI expansion.

The unexpected departure of NVIDIA’s CEO, Jensen Huang, on November 12th, is a primary factor contributing to the market’s apprehension. While the overall market showed signs of recovery, suppliers of memory chips, including those linked to NVIDIA, are facing downward pressure. These memory makers are integral to the AI supply chain, providing high-bandwidth memory (HBM) and fast data center storage essential for NVIDIA’s accelerators.

Analysts at Evercore ISI recently defended Sandisk, citing stable NAND storage demand and maintaining a price target of $2,500. However, this positive assessment has limited impact against the backdrop of the leadership change at NVIDIA.

Micron Technology (NASDAQ:MU) is also experiencing a similar decline, with its stock trading at $789.90, down 3%. Micron’s diverse product portfolio, including dynamic random-access memory (DRAM) and HBM, further connects the company to the AI accelerator market. SK Hynix (NASDAQ:SKHY), trading at $137.99, has also fallen by 3%. The Korean chipmaker’s American Depositary Shares are listed on the Nasdaq, providing U.S. investors direct access to a leading HBM producer.

Sandisk, focused solely on NAND flash memory, was spun off from Western Digital (NASDAQ:WDC) and specializes in enterprise SSDs for AI infrastructure, with edge devices and retail storage also contributing to its business. Flash wafers are sourced through a manufacturing joint venture with Kioxia.

Micron operates with a broader, vertically integrated model, while SK Hynix’s core strength lies in high-bandwidth memory, making it a leading supplier for AI accelerators, including those from NVIDIA. The company reports its earnings in Korean won, which can introduce currency fluctuations for U.S. investors.

Micron’s relatively low price-to-earnings (P/E) ratio of 10x trailing and 4x forward may attract value-focused investors. However, a low forward P/E can also signal concerns about the sustainability of peak earnings in the cyclical memory market. The company’s upcoming earnings report will be closely watched.

The future performance of Sandisk, SK Hynix, and Micron hinges on the stability of AI data center demand for enterprise SSDs and NVIDIA’s ability to navigate its leadership transition. While analysts point to stable NAND demand and growing data center business, the potential for scrutiny of AI spending plans remains a risk. Investors are advised to exercise caution until the situation stabilizes.