Apple's Potential China Deal Sends Shockwaves Through Memory Stocks

Memory stocks tumbled on Monday morning after reports that the Trump administration may allow Apple to source memory chips from Chinese suppliers. The move, seen as a potential diplomatic gesture ahead of President Xi Jinping's planned U.S. visit, could benefit Chinese companies such as CXMT and YMTC.

SanDisk shares plummeted 9% to $1,458.29, while Micron Technology stock fell 7% to $897.86 in early trading. Western Digital and SK Hynix also declined by 7% and 5%, respectively. The Roundhill Memory ETF, which tracks the memory sector, dropped 7% to $53.62.

Analyst KC Rajkumar of Lynx Equity Research called the selloff an 'overreaction,' citing supply constraints and qualification gaps that make Chinese memory a less significant threat. According to Rajkumar, CXMT is not qualified for Apple iPhones and YMTC has allocated its latest-generation NAND to domestic customers.

Despite the potential benefits of sourcing memory from China, any procurement arrangement could be complicated by both companies' presence on the Pentagon's Section 1260H list. The list identifies companies with alleged ties to China's military-industrial base.