Why SandiskStock Keeps Going Down
Key Points
Investors are frightened a new CXMT DRAM product will steal Sandisk market share.
But Sandisk doesn't have any DRAM market share to steal. Sandisk makes NAND memory; Micron makes DRAM.
CXMT will introduce its DRAM this year, but may not produce it at scale for years.
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This is starting to look serious. Tic-tac-toe, three days in a row, Sandisk (Nasdaq: SNDK) stock has gone nowhere but down. Adding Wednesday's 4.6% decline (as of 2:35 p.m. ET) to similar declines Monday and Tuesday, shares of Sandisk -- one of the world's biggest makers of computer memory chips -- are now down 11% for the week, and approaching a 20% loss for the month.
Don't say you were not warned.
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What's dogging Sandisk stock this week
As far back as Monday -- my, how time flies! -- I warned that this downturn had the potential to turn into a rout, as investors worried over news that Chinese DRAM company CXMT -- which makes DRAM memory chips -- was closing its technology gap with Western memory chipmakers.
CXMT bragged on Monday that it is making "key progress" on "4F square" technology to increase DRAM storage density. It further promised to introduce products targeting the market for high bandwidth memory (HBM) for AI data centers before the end of this year.
The last time something like this happened, Sandisk stock got cut nearly in half.
What's next for Sandisk stock
And yet, several things are worth remembering for investors spooked by the Sandisk sell-off. First and foremost: CXMT makes DRAM memory, but Sandisk doesn't. Instead, Sandisk makes NAND, a related technology that can be used similarly to HBM in a form that Sandisk calls "high bandwidth flash".
But they're not directly comparable, and CXMT is not a direct competitor to Sandisk.
It may not even be much of a competitor to Micron. In a note on StreetInsider.com today, Mizuho analyst Jordan Klein points out that while CXMT promised to "introduce" its 4F square product in 2026, it's probably years away from producing the chips at scale. He also doubts the CXMT product is comparable to HBM chips that Micron builds today, or to Sandisk's HBF. Most likely, it's an ordinary DRAM chip not suitable for AI data centers at all.
TL;DR Sandisk investors are panicking over this. They shouldn't.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
