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Why SandiskStock Dropped (Again) on Friday
Key Points
CXMT spooked Sandisk investors with a tech advance in DRAM this week.
Worries today over the potential for higher interest rates may add to investor concern.
Well, it's Friday, I've got good news and bad news for investors in Sandisk (NASDAQ:SNDK) stock.
Bad news first: One of the biggest names in computer memory chipmakers, Sandisk stock declined every single day so far this week, and is down again on Friday, slipping another 3.2% lower through 10:45 a.m. ET.
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But now here's the good news: There's basically no new bad news.
Image source: The Motley Fool.
New news and old news
Granted, the old bad news is still in effect. On Monday, Chinese DRAM specialist CXMT, the fourth-largest computer memory maker by market share, announced it has made progress with its new "4F square" technology to increase DRAM storage density. The company plans to have a product ready for market before the end of this year, incorporating the new technology.
And it's investor fears of this new competition from CXMT that have been driving Sandisk stock lower all week long, for a total loss of 15%.
Further worries did surface this morning, of course, when the U.S. Department of Labor reported its September Consumer Price Index data. This showed inflation rising 3.7% year-over-year, 10 basis points faster than expected. Higher inflation can prompt the Federal Reserve to raise interest rates, and this is generally viewed as bad news for tech companies because it raises the cost of debt -- and debt is what a lot of companies have been using lately to buy Sandisk memory chips.
Sandisk looks safe
Still, that's a macroeconomic risk that affects all stocks. As far as SanDisk-specific concerns go, I think CXMT is still the big one weighing on investors today -- and, as I've repeatedly stated, it's an unnecessary worry.
CXMT makes DRAM. Sandisk doesn't. CXMT is therefore not a huge threat to Sandisk, and so worries about Sandisk stock seem overblown.
Rich Smith 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.