Memory and storage stocks fell sharply on Thursday even after Sandisk (SNDK) and Western Digital (WDC) posted strong quarterly results. It was a classic "sell the news" reaction: the numbers were good, but not strong enough to meet the elevated expectations already reflected in their share prices.
Both companies topped estimates and issued solid guidance, yet investors had positioned for something even stronger. Sandisk fell around 9.2% and Western Digital about 14.6% in premarket trading, pulling peers such as Micron (MU) and Seagate (STX) lower, according to Investing.com.
Beats That Were Too Small
Both companies delivered figures above Wall Street's estimates. Sandisk forecast revenue of $10.3 billion to $10.8 billion for the upcoming quarter. Western Digital guided for revenue of around $4.1 billion, plus or minus $100 million, alongside adjusted earnings of roughly $4 per share. Both outlooks were above consensus estimates.
The issue was the bar. After a strong multi-quarter run in memory and storage stocks, investors were looking for guidance that did more than beat forecasts. "Solid but not spectacular" was enough to trigger profit-taking.
RBC Capital Markets said investor skepticism could continue, noting that margins may be near peak levels while price growth is moderating.
Stock Moves on August 6
Stock
Move (premarket, Aug 6)
Western Digital (WDC)
around -14.6%
Sandisk (SNDK)
around -9.2%
SK Hynix (listed in South Korea)
around -6.2%
Micron (MU)
around -3.7%
Seagate (STX)
around -3.6%
The figures reflect market moves around the time of the report and may change throughout the session.
An analyst downgrade added to Western Digital's decline. Summit Insights analyst Kinngai Chan downgraded the stock to Hold, warning that the company's transition to heat-assisted magnetic recording, or HAMR, drive technology "creates risk."
Chan expects average selling prices per exabyte to decline as HAMR drives begin shipping in 2027, reversing four quarters of price gains. Higher transition costs could also weigh on gross margins. Western Digital has said it plans to begin ramping HAMR production in 2027.
"We think most of the positives have already been priced into the stock and expect financial outperformance to moderate into 2027," Chan said.
Demand Signals Remain Strong
The selloff appears to reflect valuation and expectations more than a sudden collapse in demand. Amazon (AMZN) recently increased its projected capital expenditures for 2026 to $220 billion from $200 billion, with CEO Andy Jassy citing higher memory costs as a key reason for the increase.
Jassy also said that even at that spending level, Amazon would still lack enough capacity to meet all the demand it expects in 2026. That is a clear sign that the AI infrastructure build-out continues to put pressure on memory and computing supplies.
The fundamental demand backdrop remains strong, but the stocks had already priced in much of that strength. This left little room for anything short of a major upside surprise.
A Memory and Storage Story, Not a Chip-Wide One
Memory and storage stocks were hit harder than the semiconductor sector more broadly. Micron and Seagate traded lower, while chipmakers such as Marvell and AMD showed relatively limited movement.
That distinction matters to investors. This was not necessarily a broad retreat from the entire AI-hardware trade. Instead, it was a repricing of one highly valued segment of the market after forecasts that were strong, but not strong enough to match investor expectations.
Gotrade is the trading name of Gotrade Securities Inc., which is registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
