Storage chip stocks hit the brakes at high levels: SanDisk plunged over 10% intraday, Micron fell nearly 9%.

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After experiencing a strong rebound for two consecutive days and just posting the best quarterly performance in history, U.S. memory chip stocks suffered a sharp sell-off on Wednesday.

On Wednesday, July 1st, Eastern Time, major U.S. stock indices came under overall pressure. In early trading, when the S&P 500 and the Nasdaq were down about 0.2% and 0.6% respectively, the Philadelphia Semiconductor Index (SOX) had already widened its intraday loss to over 5%, dragging the Nasdaq 100 down by more than 1%.

The decline was particularly severe in the memory sector, with the U.S. memory index once falling about 9% intraday. Among component stocks, SanDisk (SNDK) once fell more than 10%, Kioxia ADR more than 10%, Micron Technology (MU) nearly 9%, and Western Digital (WDC) and Seagate Technology (STX) both more than 8%.

At the same time, semiconductor equipment stocks such as Applied Materials and Lam Research also fell simultaneously, indicating that funds are pulling out of the previously high-flying AI hardware segment.

Analysts believe this round of decline is more like profit-taking after an unprecedented surge rather than due to a significant deterioration in industry fundamentals. Over the past quarter, driven by booming AI infrastructure investment, hot demand for HBM high bandwidth memory, and improved supply-demand expectations for the memory sector, memory chip stocks became one of the world’s top-performing semiconductor sub-sectors.

Before the sharp fall, chip stocks had just experienced two days of strong gains

It’s worth noting that Wednesday's sharp decline happened after several consecutive days of gains for chip stocks.

On Monday and Tuesday of this week, U.S. semiconductor stocks extended the AI-driven rally. On Tuesday, the Philadelphia Semiconductor Index closed up 3.92%, gaining 11.05% for June, and soaring 87.75% for the second quarter, the largest quarterly gain on record for the index.

The memory sector had led the entire semiconductor industry earlier. On Tuesday, the U.S. memory chips and hardware supply chain index rose 3.83%, up 159.01% for the second quarter, far surpassing both the broader market and the SOX index. On that day, SanDisk closed up nearly 10.9%; Micron Technology gained nearly 0.8%.

Among component stocks, SanDisk surged 257.88% in the second quarter, Micron Technology 241.67%, Seagate Technology 146.55%, Western Digital 136.19%, Applied Materials 111.78%, and Lam Research 103.01%.

Why did the market suddenly reverse?

Recently, many Wall Street institutions have warned that although AI-driven memory demand is still very strong, after several months of big gains, market valuations have evidently increased.

Analysts believe this correction was mainly driven by several factors:

First, concentrated profit-taking pressure was released.

After an epic surge in the second quarter, memory stocks became one of the most crowded institutional AI trades. In the absence of new major catalysts, many funds chose to lock in profits.

Second, the market began to reassess the pace of the AI industry chain.

With major memory manufacturers’ share prices rising rapidly, investors have started to focus on whether earnings growth in the coming quarters can keep up with faster valuation expansion. While demand for HBM, high-performance DRAM, and enterprise SSDs remains strong, discussions about future supply increases and slower price rises are heating up.

Third, sector rotation has intensified.

Recently, the semiconductor sector has significantly outperformed major U.S. indices, and many funds are adjusting positions at the end of the quarter and the start of the month, which increased volatility.

Industry fundamentals have not significantly deteriorated

However, from a fundamental perspective, most institutions have not changed their optimistic outlook on the memory sector’s upcycle.

Recently, Micron Technology and other manufacturers have said that AI servers, high bandwidth memory (HBM), and data center SSD demand remain strong, advanced memory product supply is tight, and the industry's supply-demand situation has clearly improved compared to recent years.

The market’s focus is also shifting from “Is the industry recovering?” to “How long can the profit improvement last?”

For investors, after a record-breaking rise, memory stocks may see greater short-term volatility; but if AI infrastructure investment cycles continue and HBM supply and demand remain tight, the long-term story for the industry has not fundamentally changed.

The sharp intraday fall on Wednesday looks more like a phase of cooling after historic gains, rather than an end to the memory chip industry’s positive cycle.

Risk Warning and DisclaimerThe market has risks, and investments require caution. This article does not constitute personal investment advice and does not take into account any specific user's investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their own circumstances. Investing accordingly is at your own risk. ```