Why Did Sandisk Stock Drop Today?
Key Points
Western Digital is developing a new ultra-secure HDD to protect against quantum hacking.
But is this really bad news for Sandisk?
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Sandisk (NASDAQ: SNDK) stock fell 6.1% through 11:25 a.m. ET Monday on some potentially worrisome news from its former parent company Western Digital (NASDAQ: WDC), which announced today it is working hard to develop "post-quantum cryptography hard drives" for a world where AI has become ubiquitous, and need for NAND memory less intense.
Curiously, Western Digital stock is also down today, though, which suggests not all investors may be thinking logically here.
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What the heck is a post-quantum cryptography hard drive?
In a press release this morning, Western Digital said it is in the process of qualifying "high-capacity Ultrastar UltraSMR hard disk drives" for sale. As WD sees it, AI is steadily moving to a world in which "compute-centric deployments," where large language models (LLMs) are first trained, then used to answer questions (i.e, inference), become less important than remembering all the answers that have been given to all those questions.
In this brave new world, "durability and security of that data" become more relevant than rapid data transfer, and hard disk drives become more useful (and cheaper) than solid-state drives. At the same time, WD sees quantum computing becoming more powerful and capable of breaking into the data centers where data is stored, requiring additional security to prevent this.
This is the world for which Western Digital is preparing with its Ultrastar UltraSMR hard disk drives -- and it's one in which demand for Sandisk's NAND memory chips may cool.
What's next for Sandisk
All this sounds great for Western Digital stock, and potentially less great for Sandisk -- but it's still not bad news. A world that needs more HDDs doesn't necessarily need fewer SSDs. It's entirely possible the need for both forms of storage will grow.
And Sandisk stock will come out of this just fine.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool has a disclosure policy.
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