Tech stocks plummet across the board, storage chip giants face a "massive sell-off"! SanDisk drops over 10% intraday

The tech sector sell-off triggered by software stocks on Tuesday is spreading, and recently hot storage chip manufacturers are experiencing a “collective stampede.”

On Wednesday, February 4th, Eastern Time, the three major U.S. stock indices showed mixed performance: the Dow rebounded, the S&P turned lower in the early trading session, and the Nasdaq opened lower and continued to decline, indicating continued capital withdrawal from previously strong tech sectors. In the early session, the Nasdaq’s decline widened to over 1%, with storage chip stocks falling even more, showing clear characteristics of “high-flyer correction + profit-taking.” SanDisk once fell more than 12%, Western Digital nearly 11%, Micron Technology over 9%, and Seagate Technology nearly 7%.

Why did storage chip stocks like SanDisk plunge? What is the market worried about? On the surface, the correction in storage chip stocks on Wednesday doesn’t seem to be driven by a single “black swan,” but rather a concentrated pullback caused by multiple factors: deterioration in overall market risk appetite, excessive prior gains in individual stocks, valuations and expectations pushed to extremes, ultimately triggering profit-taking and short-term capital rushes for exits.

Capital rotation amplifies tech sector decline SanDisk faces profit-taking at high levels

On Wednesday morning, U.S. tech stocks weakened, and market sentiment was cautious. For high-beta semiconductor sectors, once the index pulls back and capital shifts to defensive assets, the most likely to be sold off first are: stocks with the largest gains, the highest valuations, investor crowded bets, and the heaviest options leverage.

Storage chips are in this typical position: previously driven higher by the narrative of “AI bringing explosive memory/storage demand,” but once sentiment shifts, the pullback can be more intense.

In this round of storage market rally, SanDisk is almost the most representative “sentiment indicator.”

An article on Wall Street Insights last week pointed out that SanDisk’s stock price has surged over 1140% in half a year, making it one of the very few super-strong stocks in the U.S. market. Such a large increase naturally gives it a “bubble/emotional trading” attribute.

More importantly, after SanDisk released its earnings after the market close last Thursday, market sentiment was further ignited: since the earnings report on Thursday, until the close on Tuesday, SanDisk’s stock price has risen nearly 29% over three trading days, with a steep short-term rally.

Against this backdrop, the sharp decline on Wednesday morning appears more like a “technical correction after rapid gains”: when short-term capital realizes that “good news has been fully priced in,” any small fluctuation can trigger profit-taking.

Institutions collectively bullish, pushing expectations into a danger zone

It is worth noting that after SanDisk’s earnings, a very typical market phenomenon occurred: institutional analysts collectively raised target prices and ratings, creating a “rising confidence feedback loop.”

After last week’s earnings, multiple institutions issued recommendations and set highly aggressive target prices like $750, even $1000, based on the logic that “AI-driven server storage demand will rise.”

However, for the market, this “stacked target price increases” often has two sides:

• On one hand, it boosts bullish confidence, pushing prices higher in the short term;

• On the other hand, it can cause the stock to overextend expectations in a very short period, making the trading structure more fragile.

When market sentiment begins to cool, high target prices won’t provide support—instead, they are interpreted as: “Expectations are already maxed out; further gains require stronger profit realization.” This directly increases the probability and magnitude of a pullback.

Earnings are good but expectations too high: positive results can turn into sell signals

From the earnings perspective, SanDisk’s recent performance was a key catalyst for this short-term acceleration.

Wall Street Insights previously summarized SanDisk’s earnings: the market focused on clues related to its AI-related storage demand, price improvements, and industry recovery.

But in the case of “stock prices soaring prematurely,” earnings reports often face a typical dilemma:

Earnings don’t need to be poor; as long as they don’t exceed extremely optimistic expectations, they can trigger a pullback.

In other words, once the market has fully priced in “AI memory demand explosion + price increases + cyclical reversal,” the marginal incremental impact of earnings becomes harder to sustain.

Therefore, Wednesday’s decline is more about a cooling of overheated sentiment after earnings, rather than a fundamental deterioration.

Sector “rising and falling together”: storage chain stocks are inherently highly correlated, making corrections prone to resonance

Another feature of Wednesday is that not only SanDisk declined, but Western Digital, Micron, Seagate, and other storage chain companies almost simultaneously fell. The reason lies in the highly consistent trading logic of the storage sector:

• Demand side: AI servers, cloud provider capital expenditure, enterprise storage

• Supply side: capacity, inventory, price cycles

• Price side: upward expectations for NAND/DRAM prices

When “risk appetite weakens + profit-taking at high levels” begins, capital doesn’t just sell one company but tends to reduce exposure across the entire storage chain, causing sector-wide resonance.

What the market will focus on next: “short-term bubble bursting” or “reversal of prosperity being disproved”?

Currently, the sharp decline on Wednesday morning aligns more with the characteristics of “rapid bubble deflation at high levels” rather than a fundamental reversal. Whether this correction can stop depends on three key clues:

• Storage prices: whether NAND/DRAM prices continue to rise;
• Cloud giants’ capital expenditure and AI server demand: whether signs of cooling appear;
• Company guidance and channel inventory: whether inventory reduction pressures recur.

If these indicators remain relatively strong, the market may view Wednesday’s plunge as a “deep correction within a strong trend”; conversely, if prices and demand weaken marginally, valuation corrections in storage stocks could continue.

Risk warning and disclaimer

Market risks are inherent; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.