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Memory-chip giant SanDisk (SNDK) suffered a dramatic pullback in July, with the stock tumbling 47% in a single month. Just on June 25, the stock had closed at an all-time high of $2,335, with year-to-date gains exceeding 885% at one point. In barely a month, the stock had fallen as much as roughly 57% from its peak.
For any company, a 47% monthly decline is severe. But for SanDisk — an AI storage star that had delivered cumulative returns approaching 6,400% since its spin-off from Western Digital in February 2025 — this rout looks more like an extreme correction triggered by a confluence of multiple negative factors.
Not a Fundamental Deterioration, But a Confluence of Macro Expectations and Positioning
Analysts pointed out that SanDisk’s July collapse did not stem from a deterioration in the company’s own fundamentals. In fact, the company’s revenue in the previous quarter surged 251% year-over-year, with gross margin reaching 78.4%. Its products were sold out through the end of 2026, with a backlog of orders exceeding $42 billion.
The real triggers came from the dual pressures of shifting macro expectations and positioning dynamics. First was the regulatory shock from South Korea — in mid-July, South Korea’s Financial Services Commission tightened rules on single-stock leveraged ETFs, forcing passive deleveraging by levered products and creating a vicious cycle of “falling prices, product deleveraging, and intensifying declines.” The regulatory storm quickly spread from Seoul to U.S. markets, sending SanDisk down more than 12% in a single session.
Deeper pressure came from the market’s reassessment of AI capital expenditure sustainability. SK Hynix’s stock tumbled despite reporting record quarterly results, further intensifying concerns that the memory cycle might be peaking. Meanwhile, Alphabet reported negative free cash flow for the first time ever in its second quarter, prompting investors to question whether the massive capex plans of hyperscalers were sustainable.
Chinese Localization and AI Model Disruption Intensify Concerns
The rise of China’s domestic memory industry also rattled market sentiment in July. CXMT launched its IPO on the STAR Market, with its market capitalization briefly surpassing 4 trillion yuan. Although CXMT currently remains focused on the DDR5 general-purpose DRAM market, its capacity expansion has sparked broader concerns about shifts in the global DRAM supply landscape.
Meanwhile, the launch of China’s Kimi K3 AI model and the proliferation of low-cost AI models have raised fears of slowing demand for high-end computing power. However, BlackRock, the world’s largest asset manager, pointed out that cheaper AI models would not reduce AI spending but rather accelerate AI adoption, thereby increasing demand for infrastructure, and that the recent sell-off was an “overreaction.”
Outlook: High Volatility Likely to Persist
On a valuation basis, SanDisk’s forward P/E ratio has pulled back significantly from its highs. Among 24 Wall Street analysts, 21 still maintain a “Buy” rating, with an average price target of approximately $2,368.
However, analysts generally believe that SanDisk’s product portfolio, concentrated in flash memory and data storage, makes it more vulnerable to industry cycles than more diversified peers like Micron. While earnings expectations remain strong at least through next year, given the massive cumulative gains, the potential turning point in the memory cycle, and the rise of Chinese competition, high volatility in SanDisk’s stock is likely to persist. For investors, this may be an opportune moment to reassess the risk-reward profile of the AI storage sector.
