Hindenburg Capital shorting SanDisk triggers storage concept adjustment, Lianchuang Technology drops over 6%

Caixin February 25th News (Editor: Hu Jiarong)
On Tuesday, Eastern US time, the stock price of SanDisk, a leading storage chip company recently favored by the market, experienced intense volatility. Well-known short-selling firm Citron Capital publicly announced that it holds a short position on SanDisk and released a detailed bearish report. Following this news, SanDisk’s stock price once dropped nearly 8% intraday.

This negative news quickly triggered a chain reaction, affecting Hong Kong-listed storage concept stocks. As of press time, Lianqi Technology (06809.HK) fell 6.38%, and GigaDevice (03986.HK) dropped 4.77%, indicating that market concerns about the cyclical risks in the storage industry are spreading.

In-Depth Analysis of Citron Capital’s Three Main Bearish Arguments

Long-term Investors Exit Warning: Cycle Nearing Peak
Citron Capital pointed out that SanDisk’s significant long-term stock holdings were recently reduced by more than 25% below the current market price. This large-scale divestment sends a strong warning signal: when market commentators promote retail investor entry, industry insiders who understand the cycle are already cashing out early, implying that the storage cycle may be approaching its peak.

Industry Cycles Are Unbreakable: Supply Shortages May Be “Illusion”
Countering the market’s common expectation that “AI demand will help NAND flash memory escape cyclical fluctuations,” Citron dismisses this view. The report reviews history, noting similar market conditions in 2008, 2012, and 2018, but emphasizes that cyclical patterns have never changed.

Citron stresses that the current supply shortage is only temporary. Global capacity has already doubled from its 2018 peak, and the so-called supply constraints could vanish after an earnings call. The report bluntly states: “Nvidia has a moat, while SanDisk is just selling ordinary commodities.” The market’s overvaluation of SanDisk by comparing it to Nvidia is fundamentally flawed.

Samsung’s Intensified Competition: Price Wars and Technological Pressure
Citron highlights the significant threat posed by Samsung Electronics. Historically, Samsung has adopted a strategy of “prioritizing market share over profit” during storage cycles: initially allowing pure flash memory manufacturers to enjoy high margins, then suddenly increasing supply to lower prices.

This situation is even more severe now, as Samsung has explicitly stated it will not sell products with a gross margin below 50%, and is pushing its most advanced chips into high-end SSD markets, directly encroaching on SanDisk’s core territory.

Citron’s analysis suggests that the current tight supply is merely due to a temporary yield issue in one of Samsung’s product lines. Once the bottleneck is resolved, Samsung will leverage lower prices and newer technology to compete for SanDisk’s high-quality customers.

In conclusion, Citron states that shorting SanDisk is not a contrarian move but a natural return to market cycle fundamentals. As supply bottlenecks ease and competition intensifies, SanDisk’s stock is expected to face greater downward pressure when the cycle normalizes.

Lianqi Technology and GigaDevice Both Plunge Significantly
The sector adjustment triggered by the short-selling of SanDisk also affected Lianqi Technology and GigaDevice because both are core players in the storage supply chain, highly correlated with the industry’s prosperity.

Lianqi Technology is a global leader in memory interface chips, including DDR4/DDR5 memory interface chips. According to public information, memory interface chips are critical components of server memory modules, used to improve data transfer speed and stability. Although Lianqi does not directly produce memory chips, its performance depends directly on server memory module shipments and memory technology upgrades. Therefore, it is an indispensable “water seller” in the storage ecosystem, with demand fluctuations and server market health directly impacting its revenue.

GigaDevice, as a leading Chinese semiconductor design company, mainly focuses on storage, microcontrollers, and sensors. In the storage field, it is a domestic leader in NOR Flash and is actively expanding into DRAM and NAND Flash markets.

Thus, GigaDevice’s product pricing, inventory levels, and downstream demand are closely tied to the global storage cycle.