Shares in memory storage group SanDisk (SNDK) plunged 6% today as investors gave a thumbs-down to a $1 billion strategic equity investment in Taiwan chip maker Nanya Technology to shore up DRAM supplies.
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SanDisk said that is buying about 139 million shares of Nanya, representing a roughly 3.9% stake at a 15% discount to Nanya’s 30-day average trading price. Sandisk said under the agreement Nanya would supply it with dynamic random access memory or DRAM, products.
This could be strategically important for SanDisk because due to rapid AI infrastructure growth there are concerns over a supply squeeze for DRAM memory, NAND flash memory and hard drives. This has resulted in a shortage of memory for other technology markets such as PCs and smartphones.
However, despite this attempt to use its financial power to shore up vital supply sources, many investors were left wondering whether SanDisk had overpaid.
Why are SanDisk Shareholders Unhappy?
It is understood that investors are:
- Nervous about the risks of a cross-border deal
- Geopolitical exposure to Taiwan’s position in the global semiconductor sector,
- The impact of any Chinese military action on the island
- A longpayback horizon for investors who want immediate returns from the current AI demand boom.
The significant share price drop today is a shock given the strong performance the company has delivered over the last 12 months.
As can be seen above, it is up over 1245% over that period driven by accelerating data center adoption. It recorded data center revenue of $440 million, up 64% sequentially in Q2, with Edge revenue coming in at $1.678 billion, up 21% sequentially, and consumer revenue of $907 million, up 39% sequentially.
Is SNDK a Good Stock to Buy Now?
On TipRanks, SNDK has a Strong Buy consensus based on 12 Buy and 3 Hold ratings. Its highest price target is $1,000. SNDK stock’s consensus price target is $700, implying a 5.17% upside.
