Tech stocks plunge spreads, storage chip giants face "collective sell-off"! SanDisk drops over 10% intraday.
The wave of sell-offs in the technology sector sparked by software stocks this Tuesday is spreading, and recently popular memory chip manufacturers have experienced a “collective stampede.”
On Wednesday, February 4th, Eastern Time, the three major U.S. stock indexes showed mixed performances: the Dow rebounded, the S&P 500 turned lower in early trading, and the Nasdaq opened low and kept falling, indicating a continued pullback of funds from the previously strong tech sector. In early trading, the Nasdaq’s decline widened to over 1%, with memory chip stocks falling even more and showing a clear pattern of “high-flying stocks making up for previous gains + profit-taking.” In early trading, Sandisk fell more than 12%, Western Digital nearly 11%, Micron Technology over 9%, and Seagate Technology nearly 7%.
Why did Sandisk and other memory chip stocks drop sharply? What are markets worried about? On the surface, Wednesday’s correction in memory chip stocks didn’t have a single “black swan” event; rather, it resembled a concentrated pullback triggered by multiple factors stacking up: weakened risk appetite in the broader market, excessive previous gains in individual stocks, valuations and expectations pushed to extremes, ultimately triggering profit-taking and short-term funds stampeding out.
Sector rotation amplifies tech pullback; Sandisk faces profit-taking at highs
In early trading Wednesday, U.S. tech stocks weakened, and market sentiment was cautious. For the high-beta semiconductor sector, when the index corrects and funds rotate towards defensive positions, those most likely to be sold off first are stocks that have risen the most, have the highest valuations, the most crowded trades by investors, and the most leveraged options positions.
Memory chips are currently in this very position: previously, they had climbed steadily on the “AI-driven surge in memory/storage demand” narrative, but once the wind shifts, the pullback is correspondingly sharper.
In this memory chip rally, Sandisk is almost the most representative “sentiment barometer.”
WallstreetCN pointed out in an article last week that Sandisk’s stock price has risen over 1,140% in six months, making it one of the few super-strong performers in the U.S. stock market. The scale of the gains naturally brings it “bubble/sentiment trading” characteristics.
More critically, after Sandisk released its earnings report after last Thursday’s close, market sentiment was further ignited: from last Thursday’s after-hours announcement through Tuesday’s close this week, Sandisk’s stock price jumped almost 29% in three trading days, with a steep short-term rise.
Against this backdrop, Wednesday morning’s sharp drop was more like a “technical correction after an overly rapid rise”: when short-term traders realize “the good news is fully priced in,” any disturbance could trigger profit-taking.
Institutions crowd into bullish calls, pushing expectations into the danger zone
Notably, after Sandisk’s earnings report, a very typical market phenomenon emerged: institutional analysts collectively raised price targets and ratings swarmed in, forming a positive feedback loop of “the higher it goes, the more bullish they become.”
After Sandisk’s earnings last week, multiple institutions issued recommendations, citing aggressive price targets of $750, and even $1,000, mainly based on the logic that “AI servers are driving storage demand upward.”
But for the market, this “piled-up target price increases” often has a double-edged effect:
- On one hand, it strengthens bullish confidence, pushing the stock even higher in the short term;
- On the other hand, it can cause the stock to burn through expectations very rapidly, making the trading structure more fragile.
When market sentiment begins to cool, a high price target offers no guarantee, and can instead be interpreted as: “Expectations are already maxed out—further upside requires even stronger fundamentals.” This directly increases the likelihood and magnitude of a correction.
No matter how good the earnings, “overblown expectations” turn good news into a selling point
From a financial perspective, Sandisk’s earnings last week were a key catalyst for this round of short-term acceleration.
WallstreetCN previously reviewed Sandisk’s report, noting that the market is focused on its AI-related storage demand, price improvements, and signs of industry cyclical recovery.
However, with “the stock price having already soared in advance,” an earnings report often falls into a typical dilemma:
The report doesn’t have to be bad—if it doesn’t further surpass the already extremely optimistic expectations, it may spark a sell-off.
In other words, when the market has already fully priced in “AI-driven memory demand surge + rising prices + cyclical reversal,” the marginal incremental impact from earnings becomes increasingly difficult to achieve.
Therefore, the drop on Wednesday was more about cooling off after post-earnings overexuberance, not a sudden deterioration in fundamentals.
Sector-wide synchronicity: memory chain stocks naturally correlate, pullbacks tend to resonate
Another feature of Wednesday’s action: not only Sandisk fell, but Western Digital, Micron, Seagate and other companies in the memory chain also dropped almost simultaneously. The reason is that trading logic in the memory sector is highly synchronized:
- Demand side: AI servers, cloud giants’ capex, enterprise storage
- Supply side: capacity, inventory, pricing cycles
- Price side: expected upward movement of NAND/DRAM prices
When “weakening risk appetite + profit-taking at highs” starts, funds don’t just sell one company—they tend to reduce exposure across the entire memory chain, leading to sector-wide resonance.
What is the market watching next: “short-term bubble squeeze” or “invalidated cyclical reversal”?
At present, Wednesday’s sharp drop is more consistent with a “rapid high-level squeeze of the bubble” rather than a fundamental reversal. Whether this correction can be contained depends on three key signals the market is watching:
- Memory prices: Whether NAND/DRAM price increases continue to materialize;
- Cloud giants’ capex and AI server demand: Whether there are signs of cooling;
- Company guidance and channel inventories: Whether inventory destocking pressures recur.
If the above indicators remain robust, the market may see Wednesday’s drop as a “deep pullback within a strong trend”; conversely, if prices and demand begin to soften at the margins, memory stock valuations could continue to retreat.
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