Why SanDisk Stock Is Sinking Today
Key Points
SanDisk stock is losing ground today as investors sell out of tech stocks.
The latest BLS jobs report has the market worried that the Federal Reserve will raise interest rates this year.
- 10 stocks we like better than Sandisk ›
Tech stocks are getting hit with big pullbacks in Friday's trading, and SanDisk (NASDAQ: SNDK) stock is getting hit with a significant sell-off. The memory technologies company's share price was down 7.4% as of 11:50 p.m. ET. At the same point in the daily session, the S&P 500 was down 1.4%, and the Nasdaq Composite was down 2.4%.
While there isn't any major, business-specific news for SanDisk today, the company's share price is moving lower in response to macroeconomic risks. The latest jobs report from the Bureau of Labor Statistics (BLS) has investors worried that the Federal Reserve will hike interest rates this year, and that could hurt the rally for artificial intelligence (AI) stocks.
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Investors are having a negative reaction to a strong jobs report
The BLS published its May jobs report before the market opened today, and the print could have been considered a positive depending on how you look at it. The U.S. added 172,000 nonfarm jobs last month, far surpassing the 80,000 payroll additions called for by the average analyst estimate.
While stronger-than-expected jobs growth could be considered a positive, it could also meaningfully shift priorities for the Federal Reserve. The Fed is tasked with a dual mandate of promoting economic growth and tamping down on inflation. With job growth seemingly coming in strong, the Fed may be increasingly inclined to focus on reducing inflation by raising rates.
The chip stock rally is wavering
Semiconductor stocks have seen incredible bullish momentum this year, with strong demand for AI-related technologies helping to facilitate massive valuation gains. Despite relatively strong quarterly reports from Broadcom and Ciena this week, both stocks saw substantial valuation drawdowns -- and the sell-offs extended to other players in the broader AI space. While recent sell-offs for AI stocks could potentially wind up being just a blip on the radar, the view on the outlook for interest rates is a very important factor in whether AI chip stocks will keep marching higher.
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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.
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