Why Sandisk Stock Just Dropped
Key Points
Melius Research helped Sandisk stock hit an all-time high on Monday.
On Tuesday, bad news from OpenAI is dragging Sandisk stock down.
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Easy come, easy go. Sandisk (NASDAQ: SNDK) stock hit a new all-time high yesterday after analysts at Melius Research gave it a buy rating and a $1,350 price target, citing "unusual" demand for computer memory chips to support artificial intelligence. Sandisk stock is giving back some gains today, however, down 4.7% at 10:20 a.m. ET.
And this, too, is because of AI -- OpenAI.
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Image source: Getty Images.
What's OpenAI got to do with Sandisk stock?
OpenAI "missed its own targets for new users and revenue" in 2025, according to a just-released Wall Street Journal report. OpenAI itself calls the report "ridiculous," but investors remain nervous.
And no wonder. Rightly or wrongly, the Journal reports that OpenAI's business is slowing down, failing to hit one billion weekly active users for ChatGPT last year, with slowing revenue growth, and users jumping ship to other AIs such as Anthropic and Alphabet's (NASDAQ: GOOG) Gemini. Despite all this, OpenAI is still buying all the AI chips it can get hold of, and its costs are out of control.
Is bad news for OpenAI bad news for Sandisk, too?
And yet... and yet ... read between the lines here, and what do you see? OpenAI's growth may be slowing down, but its spending is not. To the contrary, OpenAI's problem is that it's still buying AI chips and still buying memory to help those chips run better.
This may not be great news for OpenAI investors, but it still sounds pretty terrific for Sandisk.
Meanwhile, on Wall Street, two more analysts just chimed in with bullish forecasts for memory. DA Davidson argues today's memory cycle will outlast those of the past, and TD Cowen analyst Krish Sankar agrees high prices for computer memory are here to stay.
If you ask me, that sounds pretty bullish for Sandisk stock.
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Rich Smith 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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