Why Sandisk Stock Dropped on Thursday
Key Points
Nvidia CEO Jensen Huang resigned last night, roiling the AI semiconductor industry.
Sandisk's sales of memory chips depend largely on sales of AI chips from companies like Nvidia.
Well, that was fast.
Just days after the news broke that Nvidia (NASDAQ:NVDA) CEO Jensen Huang was under investigation for an alleged affair with a Chinese spy, and just hours after reports of a second affair, this time with an Nvidia executive, leaked, Huang has now resigned, and Nvidia stock is slumping.
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Shares of the AI chip giant are down 4.5% through 11:05 a.m. ET Thursday, and Nvidia investors aren't the only ones suffering. Sandisk (NASDAQ:SNDK) stock is down, too, losing 3.4%.
Image source: Getty Images.
What this means for Sandisk stock
Why is a leadership crisis at Nvidia impacting Sandisk stock -- a completely different company that makes completely different computer chips (specifically, NAND flash memory chips)?
Basically, the theory is this: Jensen Huang and Nvidia led the artificial intelligence revolution, inventing the GPU chips that made AI training, AI inference, and AI agents possible, and investing in Nvidia's own customers (giving them money with which to buy more Nvidia chips) to keep the AI revolution rolling. With Huang out, the revolution may derail, and the industry's future mayn't be as well planned and timed to maintain momentum for AI stocks.
If that's the case, sales could slow across the industry. Nvidia's sales would suffer, but so would Sandisk's, because one of Sandisk's biggest revenue streams is selling to data centers, where Sandisk memory chips are paired with Nvidia GPUs to enable AI functions.
What's next for Sandisk stock
Fewer GPU sales means fewer memory sales -- or so the thinking goes. But here's the thing:
While there's a risk this will happen, a risk is not a certainty. If Nvidia stumbles, other AI chip companies may pick up the slack and keep the AI industry growing.
With Sandisk trading below 5x earnings, I think it's more likely to go up than down from here.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.