SK Hynix Has a Massive Warning for Sandisk Stock Investors

Sandisk (NASDAQ: SNDK) banal has made investors importantly richer implicit the past year, delivering stunning gains of much than 3,660% arsenic of this writing. The stock's phenomenal leap tin beryllium justified by the unthinkable summation successful its gross and earnings, fueled by the artificial quality (AI)-driven request for retention chips.

The request for the NAND flash chips that Sandisk sells has importantly outpaced supply. The proviso shortage has resulted successful a important leap successful NAND flash prices, powering Sandisk's maturation successful the process. However, a caller announcement by representation elephantine SK Hynix whitethorn dent the precise catalyst that's fueling Sandisk growth.

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SK Hynix plans to importantly summation NAND flash accumulation

According to a caller report, SK Hynix is reportedly going to put $51 cardinal to physique a caller NAND flash accumulation installation successful South Korea by 2029. The institution intends to code the ongoing NAND flash proviso shortage, which has been exacerbated by the rapidly rising request for retention successful AI information centers.

This seems similar a reddish emblem for Sandisk banal astatine first. After all, SK Hynix controls 18% of the planetary NAND flash market, according to Counterpoint Research. Sandisk, for comparison, has a 13% marketplace share. Moreover, SK Hynix besides sells dynamic random-access representation (DRAM), which explains wherefore it has deeper pockets than Sandisk.

The South Korean semiconductor elephantine reported $35.5 cardinal successful Q1 revenue. Sandisk, for comparison, has conscionable implicit $13 cardinal successful trailing-twelve-month revenue. So, SK Hynix is successful a stronger presumption to determination the needle successful the NAND flash market, and the monolithic outlay that it is readying implicit the adjacent 3 years could substantially summation supply.

Ideally, this should so beryllium a origin for interest for Sandisk investors. However, a person look astatine the dynamics of the NAND flash abstraction suggests otherwise.

The further proviso is improbable to dent Sandisk's momentum

The retention requirements of AI information centers are truthful beardown that the marketplace is expected to stay undersupplied done 2028. In fact, SK Hynix itself estimates that the shortage of representation chips could persist done the extremity of the decennary contempt the summation of caller capacity. So, the terms increases powering Sandisk's outstanding maturation are improbable to spell distant immoderate clip soon.