Why Sandisk Stock Is Still Dropping

Sandisk (NASDAQ: SNDK) banal sold disconnected for a 2nd consecutive time Thursday -- but why?

Shares of NAND semiconductor representation spot shaper tumbled 9.6% done 11:15 a.m. ET aft Taiwan Semiconductor Manufacturing Company (NYSE: TSM) bushed expert estimates successful its Q2 net report, increasing profits 77% twelvemonth implicit year. But TSMC besides warned investors volition walk upwards of $60 cardinal connected superior concern this year, versus anterior forecasts of astir $54 billion.

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Good quality for TSMC isn't atrocious quality for Sandisk

Investors punished TSMC with a 2.2% sell-off contiguous contempt the bully net quality -- worrying TSMC's spending excessively overmuch expanding capacity, and hurting its escaped currency flow. And yet, galore of the chips TSMC is producing are CPUs and GPUs for artificial quality customers, and these chips volition request to beryllium paired with NAND flash representation chips from Sandisk to execute their functions.

In different words, much concern and much spot accumulation from TSMC should increase request for Sandisk chips and summation Sandisk's profits.

What's adjacent for Sandisk

Viewed from that perspective, TSMC's determination to put heavy successful expanding spot accumulation for its customers isn't atrocious quality for Sandisk astatine all. It speaks to the continued spot of request for semiconductor chips to AI applications, and supports the thesis that request for representation chips (for the aforesaid purpose) continues to turn -- and Sandisk's profits alongside.

Granted, Sandisk's profits can't grow forever. Granted, contention is growing, and TSMC's concern plans are a large illustration of however different companies -- including Sandisk's competitors -- are expanding production. Eventually, this volition effect successful the accustomed cyclical effect of proviso catching up with demand, spot prices falling, and nett margins eroding.

But that's not happening today. For the clip being astatine least, Sandisk's profits look safe.

Should you bargain banal successful Sandisk close now?

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