Why Sandisk Stock Sank by Nearly 4% on Wednesday
Key Points
TurboQuant could significantly lower the physical memory required to run large AI models.
The company also announced a rather pricey investment in an Asian chipmaker.
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Wednesday was an eventful day in the life of flash memory maker Sandisk (NASDAQ: SNDK). A rival announced a technology that apparently reduces the need for computer memory, while the company divulged a pricey investment in a peer. These combined to drive the stock's price down by almost 4% by the end of that trading session.
Thanks for the memory
On Tuesday, Alphabet's Google announced that technology, TurboQuant, in its official research blog. This is a compression method that greatly reduces the memory cache used to store data from user interactions with artificial intelligence (AI) models.
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This, of course, is a rather direct threat to businesses that specialize in memory hardware, and that has long been Sandisk's stock in trade.
Separately, the following day, Sandisk revealed in a regulatory filing that one of its subsidiaries purchased 139 million shares of Nanya Technology Corporation, a memory chip developer and manufacturer based in Taiwan. This purchase, which totals $1 billion, gives it just under 4% of the company's outstanding common shares, which are traded on that country's stock exchange.
In addition to the transaction, SanDisk and Nanya entered into a strategic supply agreement under which SanDisk will receive Nanya's dynamic random access memory (DRAM) products. Sandisk said this agreement "is intended to support the company's long-term DRAM sourcing strategy."
Time to Google "challenges for Sandisk"
Of the two developments, the one I'd worry about if I were a Sandisk investor is the Google announcement. While TurboQuant seems to be some time away from adoption, the technology (and its potential offshoots) could pose a real threat to memory hardware makers. It's early days, however, so it's best to wait and see how TurboQuant performs in real-world scenarios before hitting the sell button.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
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