The memory trade collapses as Sandisk sheds 17%, Micron sinks to May levels

If Wednesday's stock market rally was a broad vote of confidence in the Democratic sweep of the US midterm elections, Thursday is the other side of that coin. While the AI sell-off already began on Wednesday, it has kicked into higher gear on Thursday.

The NASDAQ Composite has swung to a 4% loss in the morning regular session, while the S&P 500 and Dow Jones also shed Wednesday's gains. Ground zero of the fallout is the semiconductor space, particularly memory.

Memory chips trade lower on bearish outlook for AI

Bears believe that tough talk by the incoming class of Democratic Congressional members against AI data centers could lead to a major slowdown in the industry. Sandisk (SNDK) leads the pack, down over 17% at the time of publishing to $860, a price tag it hasn't seen since April of this year. Micron (MU) tumbles 12% to $700.

Nvidia (NVDA) is down 6% to $187 for the first time since April. Advanced Micro Devices (AMD) plunged an astounding 13%to $423, completely wiping out all its post-earnings rally from earlier in the week. Marvell Technologies (MRVL) shed more than 10%, pushing its losses since the October 6 range high to more than 50%.

"There is no way to sugarcoat that Democrats taking control, especially over the Senate, will create some major hurdles for AI and tech legislation in the Beltway over the next 2 years," Yorkville's partner and managing director, Dan Ives, wrote on Wednesday.

Ives said that Democratic control of Congress could stall the buildout of between 800 and 1,000 data centers across the US over the next two years as the incoming class adopts stricter regulation of the industry. For the moment, this is largely just sentiment, but bears point to Democrat Gina Hinojosa's surprise win of the governorship in Texas. While the previous three-term Republican governor Greg Abbott already initiated a moratorium on new data center construction in the lone star state, Wall Street had believed that he would rescind the order if re-elected. Now that Hinojosa has won, the thinking goes that the moratorium will stay in place.

Texas has become the leading state for the AI data center buildout as the previous Republican lock on statewide office's led to a permissive view for data center developers. Most hyperscalers have existing data centers or plans to build them in Texas, particularly SpaceX's (SPCX) Elon Musk who poured hundreds of millions into Texas races.

A slowdown in the AI buildout could render the ongoing memory shortage narrative obsolete, leading to a breakdown in recent pricing power. This massive swing against memory producers is interesting for the other postive news it ignores.

Reports on Thursday suggest that the Trump administration is at loggerheads with South Korea's SK Hynix (SKHY) over its planned memory chip plant in Dalian, China. SK Hynix is have difficulties getting licenses to export semiconductor production equipment from the US to the plant. Analysts suggest the company's difficulty with the Commerce Department could slow down SK Hynix's planned production plant in New York State as well. This would lead the high prices for NAND and DRAM supply to have little reason to pullback as the shortage would likely remain in place.

Sandisk and Micron technical analysis

Sandisk's sell-off is trading as if the downtrend will be sustained. The stock was already trading below its 200-day Simple Moving Average (SMA) but is now well into oversold territory on the Relative Strength Index (RSI). The RSI reading of 25 hasn't been this oversold since April of 2025.

The one bright spot is past resistance between $725 and $775 that might turn into support. It's important to remember that Sandisk is now trading at about three-and-a-half times forward earnings per share (EPS), so it could have an extreme rally off these levels if the dystopian future doesn't come to pass.

Micron's plunge has its first technical support level near $650. The threshold worked as both resistance and support back in May of this year. This tells us that the massive price collapse could at least come to a head soon since it's already trading in the $680s. The RSI at 28 means the stock is already in oversold territory and could find support relatively soon.

However, a break below the $650 level means that Micron could crash all the way to the mid-$450s, a region that worked as resistance in February and March of this year.