Why Sandisk Stock Just Dropped
Key Points
South Korea's government just floated the idea of taxing excess corporate AI profits.
Sandisk doesn't do much business in Korea, but could be at risk if other governments have the same idea.
"We're from the government, and we're here to help."
Back in the 1980s, this was the punchline to a Ronald Reagan joke: "What are the nine most terrifying words in the English language?" It's gaining currency today on worries global governments may impose windfall profits taxes on AI companies.
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Sandisk (NASDAQ: SNDK) stock is suffering in response, its shares down 5.8% through 10:20 a.m. on worries government is about to kill the golden AI goose.
Image source: Getty Images.
What Korea just did to Sandisk
The Korea Herald reports that Presidential chief of staff Kim Yong-beom is proposing on Facebook that South Korea levy a special tax on AI companies to fund a "national dividend," and ensure "excess profits in the AI era are [not] concentrated" among just a few companies but shared by all Koreans.
For now, this is just a Facebook post -- not official Korean policy. It's also drawing fire in Korea, where opponents decry the idea as "dangerous and irresponsible," and are demanding President Lee Jae Myung "immediately dismiss" Kim.
And yet, the incident highlights a risk: It's not just Sandisk's competitors the company must worry about, attempting to horn in on Sandisk's massive profits in computer memory chips and offering competing products at lower prices to win market share.
Now, Sandisk has to worry about governments like Korea's wanting a piece of the action.
What is the real risk for Sandisk?
Admittedly, the risk to Sandisk stock seems low right now. Sandisk's an American company, for one thing, with limited ties to Korea. Investors' greater worry is that Korea's idea may catch on in countries where Sandisk does manufacture. (Such as China and Japan.)
We've seen proposals like this before, such as when Bitcoin profits drove discussion of how to tax cryptocurrency. AI profits and Sandisk could be next.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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