Why Sandisk Stock Dropped on Monday
Key Points
CXMT has made "key progress" on "4F square" technology to increase DRAM storage density.
SK Hynix and Samsung on working on similar advances.
CXMT memory chips aren't necessarily cheaper than Korean or Western alternatives.
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Sandisk (NASDAQ:SNDK) stock sank 6.6% through 9:55 a.m. ET Monday -- and it's no mystery why.
Three months ago, worries about the durability of artificial intelligence demand combined with the threat of new competition in memory chips from China to cut Sandisk's stock price in half.
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An IPO by ChangXin Memory Technologies, or CXMT -- a Chinese maker of DRAM memory chips -- sparked much of this selling. Today, CXMT is back in the news.
Image source: The Motley Fool.
China news today
As TradingView.com reports, CXMT has made "key progress" on "4F square" technology to increase DRAM storage density and will release a new product targeting the AI data center market later this year.
CXMT isn't the only company exploring this technology. Indeed, both SK Hynix and Samsung have announced similar progress. That's not necessarily good news for U.S. memory producers like Sandisk and Micron, however. It still adds one more company to the list of rivals making DRAM advances, and threatening to eat their market share!
What it means for Sandisk stock
Still, there are two reasons Sandisk investors might not want to panic. First and foremost, because Sandisk doesn't actually make DRAM at all! It's a NAND memory specialist, and so, while competing in the same general industry as CXMT, it's not a direct competitor, blunting the threat.
And second, as Yahoo! Finance reports, the threat from CXMT may not even be as sharp as feared. Most investors first heard of CXMT when Apple asked permission to buy DRAM chips from it back in July. Apple soon abandoned the effort, however, when it learned CXMT was demanding prices even higher than SK and Samsung were charging!
Turns out, CXMT isn't quite as scary as we thought. And Sandisk investors needn't be as nervous as they are.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Micron Technology. The Motley Fool has a disclosure policy.
