Flash memory giant suddenly hit with an "attack"! SanDisk's stock once plummeted over 8%. Can the NAND demand myth continue?

On Tuesday Eastern Time, the recently popular storage giant SanDisk faced a short attack, with its stock price dropping over 8% at one point.

Earlier that day, well-known short-selling firm Citron Research announced that it held a short position in the storage chip manufacturer. Citron also detailed its bearish outlook on SanDisk and emphasized the cyclical pressures facing the storage industry.

This was a blow to SanDisk investors, as the recent surge in its stock price was driven by investor bets that the NAND industry could leverage artificial intelligence to generate strong demand and escape cyclical risks.

Since the beginning of this year, SanDisk’s stock has risen 175%, and over the past 12 months, it has increased by more than 1200%.

Citron’s Bold Bearish View on SanDisk

Based on Citron’s posts on X, its bearish reasons for SanDisk can be summarized into three points: cyclical pressures in the storage market, increased competition from Samsung, and the exit of long-term investors.

Citron first pointed out that Western Digital, a long-term investor in SanDisk, recently sold a large portion of its SanDisk shares at a price 25% below the current market price, which is a warning sign.

“When TV commentators are banging the table, urging retail investors to buy in, Western Digital sold a significant part of its holdings a few days ago at a 25% discount. Why? Because they know the cycle is about to peak, so they didn’t wait for the alarm to ring.”

Citron then discussed the persistent cyclical issues in the NAND industry. It noted that similar patterns occurred in 2008, 2012, and 2018, and this time is no different.

“Current supply shortages are only temporary because current capacity has already doubled the 2018 peak. This shortage is just an illusion of supply; it could disappear in a quarterly earnings call,” the firm implied, suggesting that current supply constraints are temporary.

The firm believes that the market prices SanDisk similarly to Nvidia, but highlights a key difference: “Nvidia has a moat. SanDisk sells ordinary commodities.”

Citron also emphasized the threat from Samsung. It pointed out that Samsung has historically prioritized market share over profit in the storage cycle—waiting for companies like SanDisk, which sell pure flash memory chips at 50% gross margin, to settle into a stable state before suddenly increasing supply and lowering prices.

Furthermore, Citron noted that this time, Samsung’s threat might be even greater: Samsung recently announced it will not sell any products with less than 50% gross margin and is pushing its best chips into the high-end SSD market that SanDisk relies on for survival. This means Samsung is aggressively targeting SanDisk’s high-quality customers with lower prices and newer technology. “And what is the only reason for current supply tightness? Merely a temporary yield issue on another Samsung product line. But this bottleneck is limited in time.”

The firm concluded: “Shorting SanDisk stock is just going with the market trend. When the cycle normalizes, the stock price will be lower.”

SanDisk’s New Product Upgrades and Market Response

Shortly after Citron announced its short position, SanDisk held an online event celebrating its one-year spin-off from Western Digital. The company also launched a new generation of portable SSD products and released a YouTube video highlighting what users can do with extra digital storage space.

However, this product launch apparently did not satisfy the market, and SanDisk’s stock continued to decline. A user on X commented under SanDisk’s official post, “We were all expecting a big announcement, and this is it?”

Now, all eyes are on the public statements of SanDisk’s executives. The company’s executives are scheduled to speak at Bernstein’s “Future of Technology Trends” forum on February 25, and will participate in Morgan Stanley’s Technology, Media & Telecom Conference on March 3.

Can NAND Break Free from Cyclical Fluctuations?

In fact, Citron’s core skepticism about SanDisk’s stock lies in the ongoing memory shortage.

Currently, the entire memory market still faces severe supply shortages. Multiple research firms, including Counterpoint Research, report that DRAM prices surged 40% to 50 in Q4 2025, and TrendForce warns that a 50% or greater increase in memory product prices is becoming a baseline expectation.

However, the memory industry has always been cyclical, with periods of shortages and oversupply—just as Citron pointed out, this cyclical pattern has played out multiple times in the past.

Nevertheless, SanDisk executives stated earlier this month during their earnings call that driven by AI, the NAND market is undergoing a structural change, “This structural change is sustainable, reducing the cyclical nature of NAND business and creating higher long-term average profit margins and returns.”

CEO David Goeckeler noted that AI is significantly changing storage demand, with data center storage needs expected to grow over 60% by 2026. The supply tightness is expected to persist beyond 2026, supporting pricing power.

This statement has led many Wall Street investors to bet that the long-term demand driven by AI, combined with SanDisk’s multi-year supply agreements, will reduce the NAND industry’s traditional cyclicality and shift the industry toward a more stable, high-margin structure. Under this optimistic outlook, SanDisk’s stock has risen accordingly.

But now, Citron’s high-profile short may have shattered some investors’ expectations for the NAND industry’s prospects. Will SanDisk and the entire storage sector revert to the cyclical pattern as Citron suggests? We will wait and see.

(Article source: Cailian Press)