Why Did Sandisk Stock Drop Friday?
Key Points
Citi says it's time to buy semiconductor stocks -- but investors disagree.
AI chip sales drive Intel's fastest sales growth in 15 years.
Sandisk stock sells off on anyway.
Easy come, easy go. At one point yesterday, Sandisk (NASDAQ: SNDK) stock was up 6% -- before giving back almost all its gains at the close. Today, Sandisk continues to slide lower, with losses hitting 6.5% as of 11:25 a.m. ET.
And yet, the news for Sandisk today is actually pretty good.
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Citi says "buy chip stocks"
Citigroup this morning called the recent broad-based sell-off in semiconductor stocks a buying opportunity for investors. High demand for AI chips and memory chips at AI data centers is driving chip sales, says Citi, accounting for about 34% of total chip sales, and Citi sees demand continuing to outrun supply through 2030.
Automotive and industrial chip demand accounts for 21% of the market and is also growing. Really, the only place chip sales are sagging is in PCs, mobile phones, and consumer electronics. That's 42% of the market -- a big chunk -- but sales are only weak because memory costs so much, and there's not enough supply!
All things considered, this is bullish for Sandisk, which supplies the memory and reaps the high prices.
Intel sales soar
On top of this positive commentary, Intel (NASDAQ: INTC) just reported a big earnings beat -- pro forma profits of $0.42 per share were twice what Wall Street expected. Sales grew 25% to $16.1 billion, Intel's fastest revenue growth in nearly 15 years, and were also more than analysts forecast.
Intel CEO Lip-Bu Tan says "AI is driving unprecedented demand for compute," with notable growth in sales of Intel Xeon processors for inference solutions (i.e., answering questions). That's a segment of the artificial intelligence market known to require especially large amounts of memory chips to function.
These are all reasons to buy Sandisk stock -- not sell it.
Citigroup is an advertising partner of Motley Fool Money. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool has a disclosure policy.