Investing.com - Micron Technology (NASDAQ: MU) and SanDisk (NASDAQ: SNDK) shares fell in pre-market trading Monday after weekend reports claimed the Trump administration may allow Apple to source DRAM from China’s CXMT and NAND flash from YMTC. Micron stock fell 3% and SanDisk was lower by 5%.

At least one analyst thinks the reaction is misplaced. KC Rajkumar of Lynx Equity Research published a note Monday morning calling the selloff in MU and SNDK "an overreaction," arguing that supply constraints and qualification gaps make the China memory threat to Apple far smaller than the headlines imply. Micron (NASDAQ: MU), as the dominant U.S. supplier of the high-density lpDDR5x DRAM that Apple requires for iPhones and Macs, is the most direct equity expression of any shift in Apple’s memory sourcing strategy.

The weekend reports, first circulated by outlets including wccftech.com, suggested the potential procurement approval was being discussed as a diplomatic gesture ahead of President Xi Jinping’s planned U.S. visit in September. Apple has acknowledged it is "evaluating all options" on memory supply, with the company noting that Chinese sourcing "could help us on the supply side and perhaps the pricing side." But Rajkumar’s channel checks paint a more limited picture of how far that evaluation has actually progressed.

On CXMT, Rajkumar found that the Chinese chipmaker has been qualified for only one low-volume Mac SKU and has not been qualified for iPhones at all. More critically, he argues that CXMT’s poor yield on lpDDR5x makes it structurally incapable of supplying Apple at any meaningful scale, regardless of whether Washington provides political cover. "CXMT supply is unlikely to dent the shortage Apple is facing in DRAM, nor could CXMT supply improve Apple’s negotiation position at traditional suppliers such as MU," he wrote.

The YMTC picture is even thinner. Rajkumar’s checks indicate Apple has not qualified YMTC’s NAND for any of its products. Compounding that, YMTC has reportedly allocated its latest-generation NAND for domestic consumption, directing capacity toward Android smartphones, electric vehicles, and Lenovo notebooks. That leaves little available supply for Apple even if a formal policy green light were issued.

The policy backdrop has been whipsawing memory stocks for weeks. On August 17, Commerce Secretary Howard Lutnick told the Wall Street Journal that Washington directly opposed the arrangement, saying "it’s not great American companies using Chinese memory" — a statement that sent SNDK and MU sharply higher that session.

Adding complexity to any formal approval scenario: both CXMT and YMTC remain on the Pentagon’s Section 1260H list of companies with alleged ties to China’s military-industrial base, a designation that could complicate any procurement arrangement regardless of White House signaling.

The clearest near-term catalyst for memory stocks is the timing and outcome of Xi’s U.S. visit, on or around September 24. If the summit produces a formal policy shift allowing Apple to diversify its memory supply chain toward Chinese vendors, market reaction will likely hinge on whether analysts share Rajkumar’s view that qualification and yield realities cap any near-term competitive impact on Micron and SanDisk. A policy reversal or failure to reach a bilateral agreement, on the other hand, would likely reprise the August 17 dynamic when Lutnick’s comments sent both stocks surging. Investors should also watch for any formal Trump administration statement clarifying or walking back the weekend reports, which as of Monday morning had not materialized.