Sandisk joins the Nasdaq

The Nasdaq is ushering in the new era of the AI trade.

Late Friday, the index announced that memory chip maker Sandisk will be replacing software firm Atlassian in the Nasdaq 100 index starting April 20.

Shares soared 11.83% today on the news. But the single-day move is nothing compared to how much Sandisk has climbed recently: Shares have risen 301.26% this year, and 2,879.36% over the past 12 months (yes, you read that number correctly).

Meanwhile, Atlassian took its ousting like a champ and rose 7.26% today.

The future is hardware

Nasdaq’s move is a sign of the times for how the AI trade is evolving. While traditional software companies have been rattled by the so-called SaaSpocalypse, which questions which of them will survive the AI era, memory storage stocks have had a record-breaking year, as investors anoint them the “picks and shovels” of the AI industry.

Zoom in: Sandisk makes data storage hardware (mainly NAND flash memory chips) which are used for a slew of tech like laptops, servers, USB components, and most importantly, AI data centers. Projections about data center construction and the subsequent need for data storage are the key businesses propelling the stock higher.

The numbers back up the logic: When the company last reported earnings at the end of January, Q2 revenue came in at $3.03 billion, up 61% year over year. Sandisk is projecting its Q3 revenue, which it will report at the end of April, to land between $4.4 billion and $4.8 billion—nearly 60% higher than analyst estimates.

“We expect another very strong quarter driven by continued NAND supply tightness, with investors focused on the path forward for pricing and the company’s customer traction,” wrote Goldman Sachs analyst James Schneider in a note last week, where he reiterated the firm’s Buy rating on Sandisk.

Mesmerized by memory stocks

Sandisk isn’t the only AI hardware name having a blockbuster year. Just today, KeyBlanc analyst John Vinh argued Micron could soar up to 40% higher, even after rising 513.31% over the past 12 months, given the memory chip shortage that has enabled companies like Micron to raise prices for their products.

It’s basic economics: If your product is scarce, you’re in the driver’s seat when it comes to pricing power. But one company’s moment in the sun is another’s downfall. Farewell, Atlassian. Nobody really understood what you did before, and they certainly won’t now.—LB