Key Points
Sandisk stock is falling as the AI memory chip trade has continued to lose steam.
The reaction to Sk Hynix's Q2 results and concerns about Chinese competition are creating an uptick in bearish sentiment.
Sandisk stock is also falling in response to macroeconomic risks.
Sandisk (NASDAQ: SNDK) stock is getting hit with another round of big sell-offs on Wednesday. The company's share price was down 4.5% as of 1:35 p.m. ET against the backdrop of a 0.7% decline for the S&P 500 and a 0.7% decline for the Nasdaq Composite. Sandisk had been down as much as 7.9% earlier in the session.
Memory and storage stocks are seeing a substantial valuation pullback that's a key factor in broader valuation contractions for AI companies and the market at large. But despite trading down roughly 55% from its high, Sandisk stock is still up roughly 2,400% over the last year.
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Sandisk is slipping as investors reposition on AI chip stocks
Memory and storage specialists have seen huge sales and earnings growth connected to demand stemming from artificial intelligence (AI) over the last year, and Sandisk shareholders have been massive beneficiaries of the trend. On the other hand, the market has been souring on the memory chip trade recently.
SK Hynix's stock is seeing continued bearish momentum following its recently reported second-quarter results, and the reaction to the print is having a spillover effect on Sandisk and other AI stocks. While Sk Hynix posted very strong sales and earnings growth, results on both fronts came in below the average analyst forecasts. Adding additional valuation pressures for Sk Hynix, Sandisk, and other big AI names, investors are becoming increasingly concerned about competitive pressures from rival Chinese offerings.
Macroeconomic concerns are also sending Sandisk stock lower
With no clear end to the Iran war in sight, oil prices have continued to move higher. As a result, the outlook on inflation is worsening again -- and investors are worried that it could result in higher interest rates.
The Federal Reserve is set to announce whether or not it will raise interest rates at 2 p.m. ET, and most investors and analysts expect that the central banking authority will opt to keep the benchmark rates at their current levels. On the other hand, the market is bracing for Fed commentary to lean hawkish and suggest the likelihood of rising rates in the future. If the Fed returns to raising rates, it could put a significant damper on bullish momentum in the stock market.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.