Sandisk drops 63% as Texas permit freeze and AI policy hit chip stocks

Sandisk shares drop 63% from June peak

Sandisk (NASDAQ:SNDK) shares were among the hardest hit in the semiconductor sector on 5 November 2026. The company’s share price has fallen 63% from its peak in June.

In its latest quarter, Sandisk reported revenue of $11 billion, a 23% increase from the prior quarter and a 378% increase year over year. The company achieved a non-GAAP gross margin of 85.1% and generated $5.7 billion in adjusted free cash flow.

The stock is trading at approximately 9 times trailing earnings, while its forward price-to-earnings ratio has dropped to about 4x, below its 11x average and the lowest level in a year.

During the last quarter, Sandisk taped out its first high-bandwidth flash memory die and closed two new multiyear business model partnerships. TradingPedia reported that Micron Technology has been outperforming Nvidia in both stock price and revenue growth.

In other market activity, Air France-KLM reported a 162% increase in Q3 adjusted operating profit, though the company has not yet adjusted its guidance for jet fuel price relief. Gulf exports saw a 10% increase during the month of October.

Democratic control and AI regulation concerns

This shift in the political landscape has prompted concerns that increased Democratic scrutiny could slow the expansion of artificial intelligence and data centres.

A lawmaker’s proposal to pause AI development has contributed to negative sentiment in the semiconductor market. This proposal added downward pressure on chip stocks on 5 November 2026.

European chip manufacturers, including Soitec, ASML, ASM International, and Infineon, experienced stock declines on 5 November 2026 as investors reacted to these regulatory concerns.

Investor sentiment and market rotation

Investors rotated capital away from AI hardware suppliers towards hyperscalers and domestic cyclicals following the Democratic sweep in the midterms. The semiconductor index, the SOX, fell 3.8% on Wednesday. Nvidia shares also declined by 3.2% as investors sold off AI hardware suppliers following the midterm election results.

JR Research, a top 3% investor on TipRanks, suggests the market likely already priced in the risks associated with a Democratic Congress, as the gains were widely anticipated.

Despite the market volatility, JR Research remains bullish on Sandisk. The investor stated: "I believe that the risk-reward is now firmly in favor of buying the dips (particularly as valuations are already at the one-year low)".

Texas data-center moratorium impacts

Eaton shares fell 9.9% on 5 November 2026, as its switchgear and transformer business is linked to a data-centre permit pause in Texas. Banks currently hold $15 billion in funded bridge loans for an Anthropic-backed data-centre project that was halted by the Texas moratorium.

Citrini’s note also argues that hyperscaler capital expenditure is near $1 trillion annualized against an ecosystem annual recurring revenue of at least $200 billion, requiring revenue in the trillions to double again.

The CEO of Maersk stated that freight rates have "disconnected" from the Gulf region.

Chip industry production and supply outlook

Sony has secured necessary memory volumes for its fiscal year 2027 hardware sales, granting it priority over PC makers in the memory supply chain. ARM reported increased confidence in achieving up to $2 billion of AGI CPU revenue across fiscal years 2027 and 2028, with purchase orders secured through calendar 2027.

Hon Hai recorded a 45.7% year-over-year revenue increase in October, which was faster than the 38.4% growth seen in September, indicating that production shipments are not slowing. AMD maintains that industry risk lies in 2028, while 2027 deliveries remain stable.

Broader market and commodity shifts

Brent crude oil prices dropped 8.7% to $94.60 and WTI fell 8.3% to $88.12, representing the largest decline since the start of the war.

Brent crude is currently trading within the $90-100 fair value band set by TD.