What Sandisk's play on surging memory prices means for our tech stocks

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What Sandisk's play on surging memory prices means for our tech stocks Published Fri, May 1 20263:20 PM EDTUpdated 4 Min Ago Zev Fima@zevfima Alexa Lo Monaco@in/alexa-lomonaco/Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. It's a new month, but it's more of the same for the S & P 500. The broad index is on its way to another record close Friday after wrapping up its best month since November 2020 on Thursday. Oil prices fell on Friday after Iran reportedly responded to Washington's latest changes to a draft agreement to end the Iran war. President Donald Trump said he was "not satisfied" with it, which helps explain why crude moved off its session lows. Still, as of 2 p.m. ET Friday, U.S. oil benchmark WTI was down more than 3%, to about $101.50 a barrel. The divergence in performance across the Club's portfolio in April reinforces our belief that there are essentially two markets right now — the data center stocks and everything else. On the "winning" side were the AI and data center-related names that have powered much of the market rally. Arm surged nearly 40% last month, while Broadcom and Alphabet each jumped more than 30%. The resurgent Amazon wasn't far behind, and electrical equipment supplier Eaton and glassmaker Corning also posted standout gains, underscoring the strength tied to anything benefiting from the AI buildout. On the other side, Cardinal Health and Johnson & Johnson were among our laggards, reflecting the market's disinterest in most healthcare names. Nike was our worst-performing stock in April, though most of those losses came early in the month in response to its disappointing earnings report on the night of March 31. After closing at $42.62 on April 10, the stock drifted a little higher and traded above $44 on Friday. Sky-high memory prices were a big theme during this jam-packed week of earnings. All of the five megacap tech companies that reported are contending with the AI-driven price surge. Plus, some of the memory companies themselves reported (Western Digital and Sandisk). On Wednesday evening, Meta directly cited the increase in memory pricing as the primary cause for its raised capital expenditures guidance . Microsoft also said rising component costs were responsible for about $25 billion worth of their calendar 2026 capex guide of $190 billion . Then on Thursday evening , Apple told investors to expect the memory price headwind to be with us for a while. As investors in companies hurt by memory prices, we must pay attention to what we're hearing from the likes of Sandisk and others. They're the ones that are actually responsible for the supply (or, in this case, the lack thereof). Looking at SanDisk's earnings call from Thursday night, its customers are reacting to the surge. Sandisk said it's seeing increased interest in multi-year supply agreements, with five signed to date valued at over $11 billion. The commitments come with locked-in purchase commitments and a mix of fixed and variable pricing. The longest of these commitments is five years. From Sandisk's vantage point, these agreements serve to ensure consistent demand and help protect against the boom-and-bust cycles that have historically plagued the memory makers. It's a major shift in business strategy. SanDisk didn't name the five customers with supply deals, but the CFO called them "very meaningful customers." So, we can assume these customers have deep pockets, and some of them may even be Club names. What do these supply deals mean for the signees? For starters, they serve to ensure a consistent supply and, in turn, help them ensure that few or no sales go unrealized due to a lack of supply. The risk with these agreements is that if demand wanes, the customers would still be on the hook financially. It goes to show the memory makers have a lot of leverage right now. However, we're not too concerned. Of course, any company spending tens of billions of dollars on AI hardware will need to demonstrate a return. But we think all the Club holdings that may have signed one of these deals are doing a good job forecasting future supply needs. If anything, they've proven to be too conservative in recent years and left revenue on the table. A final thought: While these deals are multiyear in nature, the mix of fixed and variable pricing is important to keep in mind. This means that the commitments should help with supply and, by extension, sales. But it also means the customers will still have some exposure to price fluctuations resulting from demand dynamics. For that reason, expect margin performance to remain under close scrutiny in the coming quarters and, perhaps, beyond. Club names Eaton, Arm Hol