SanDisk Shares Slide on China Competition Fears, AI Demand Jitters

Shares of SanDisk (SNDK) extended a sharp decline in Tuesday trading, falling amid a broader semiconductor selloff as investors grappled with fresh concerns over Chinese competition and the sustainability of artificial intelligence-related demand.

In pre-open trading on July 28, the stock fell 4.4% to $1,222.56, adding to significant losses from the previous session.

China Competition Heats Up

A primary catalyst for the selloff was the record-breaking Shanghai IPO of Chinese memory chipmaker ChangXin Memory Technologies (CXMT). The company raised approximately $8.6 billion in mainland China's largest-ever semiconductor IPO, with its shares surging a staggering 466% on the first day of trading, according to market reports.

CXMT's successful debut has intensified investor concerns about Beijing's commitment to building a domestic memory industry capable of challenging established players. While CXMT currently focuses on DRAM, the market fears it could pivot to the NAND flash market—SanDisk's specialty. The NAND market is highly standardized and price-driven, making it vulnerable to a new, state-backed competitor that can compete aggressively on cost.

AI Demand Sustainability Questioned

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Adding to the pressure are renewed doubts about the nature of the current AI boom. According to a Bloomberg report, Nvidia is pursuing over $750 billion in new AI infrastructure deals, sparking a debate on whether this represents a true infrastructure supercycle or a form of vendor financing.

Concerns over "circular" financing arrangements were amplified by reports that Nvidia may backstop $250 billion in funding for OpenAI to lease computing power. This has led some investors to question how much of the current demand is organic versus being supported by suppliers who are also major investors in their own customers.

Broader Market Impact

The selloff has impacted the entire memory chip sector, with peers like Micron (MU) also declining sharply. South Korean firms SK Hynix and Samsung also saw significant drops in response to the CXMT news. The pressure on SanDisk was compounded on Monday when its stock broke below the key $1,300 technical support level and its 100-day moving average, a move that often triggers further algorithmic and momentum-based selling.

The weakness was concentrated in the technology sector, with the NASDAQ falling 0.6%. In contrast, the broader S&P 500 was nearly flat, underscoring that the pressure was specific to the chip industry rather than a market-wide downturn.