Memory chip stocks hit the brakes at high levels: SanDisk fell over 10% intraday, Micron dropped nearly 9%

After two consecutive days of strong rebound and just hitting a historic best quarterly performance, the US memory chip sector experienced a sharp sell-off on Wednesday.

On Wednesday, July 1, Eastern Time, major US stock indices were under pressure overall. During the early trading session, as the S&P 500 and Nasdaq fell about 0.2% and 0.6% respectively, the Philadelphia Semiconductor Index (SOX) had already widened its intraday decline to over 5%, dragging the Nasdaq 100 down more than 1%.

Among them, the memory sector fell particularly sharply. The US memory chip sector index once dropped about 9% intraday. Among its components, SanDisk (SNDK) fell over 10%, Kioxia ADR fell over 10%, Micron Technology (MU) fell nearly 9%, and Western Digital (WDC) and Seagate Technology (STX) fell over 8%.

At the same time, semiconductor equipment stocks such as Applied Materials and Lam Research also fell in sync, indicating that capital is withdrawing from the AI hardware chain that previously saw the largest gains.

Analysts believe this round of decline is more like profit-taking after an unprecedented surge, rather than a significant deterioration in industry fundamentals. Over the past quarter, driven by AI infrastructure investment, sustained strong demand for HBM high-bandwidth memory, and improved supply-demand expectations in the memory industry, memory chip stocks became one of the strongest-performing semiconductor sub-sectors globally.

Before the sharp drop, chip stocks had just experienced two consecutive days of strong gains.

It is worth noting that Wednesday's sharp decline occurred after several consecutive days of gains in chip stocks overall.

On Monday and Tuesday, the US semiconductor sector continued the AI trading frenzy. On Tuesday, the Philadelphia Semiconductor Index closed up 3.92%, accumulated a monthly gain of 11.05% in June, and a quarterly gain of 87.75% in Q2, setting a record for the largest single-quarter increase in the index's history.

The memory sector had previously led the entire semiconductor industry. On Tuesday, the US memory chip and hardware supply chain index closed up 3.83%, with a Q2 cumulative gain of 159.01%, far exceeding the broader market and the Philadelphia Semiconductor Index. That day, SanDisk closed up nearly 10.9%; Micron Technology rose nearly 0.8%.

Among the index components, in Q2, SanDisk accumulated a gain of 257.88%, Micron Technology rose 241.67%, Seagate Technology rose 146.55%, Western Digital rose 136.19%, Applied Materials rose 111.78%, and Lam Research rose 103.01%.

Why did the market suddenly shift direction?

Recently, multiple Wall Street institutions have warned that although AI-driven memory demand remains very strong, after months of significant increases, market valuations have clearly risen.

Analysts believe this round of adjustment is mainly driven by several factors:

First, the concentrated release of profit-taking pressure.

After the epic rise in Q2, memory stocks became one of the most concentrated AI directions in institutional holdings. In the absence of major new catalysts, many funds chose to cash in gains.

Second, the market began to reassess the pace of the AI industry chain.

As major memory manufacturers' stock prices rose rapidly, investors started to focus on whether earnings growth can keep up with valuation expansion in the coming quarters. Although demand for HBM, high-performance DRAM, and enterprise SSDs remains robust, discussions about future supply increases and slowing price growth have also heated up.

Third, sector rotation has intensified.

Recently, the semiconductor sector as a whole has significantly outperformed major US indices. Many funds have adjusted their positions at the end of the quarter and beginning of the month, which also amplified volatility.

Industry fundamentals have not significantly weakened.

However, from an industrial fundamental perspective, most institutions have not changed their optimistic view of the memory industry's boom cycle.

Recently, multiple manufacturers, including Micron Technology, have stated that demand for AI servers, high-bandwidth memory (HBM), and data center SSDs remains strong. Supply of advanced memory products continues to be tight, and the industry's supply-demand relationship has significantly improved compared to previous years.

The market's current focus is also gradually shifting from "whether the industry is recovering" to "how long the earnings improvement can last."

For investors, after record-breaking gains, short-term volatility in the memory sector may increase significantly; but if the AI infrastructure investment cycle continues and HBM supply-demand remains tight, the industry's long-term logic has not yet undergone fundamental changes.

Wednesday's intraday sharp decline is more like a temporary cooling after historic gains, rather than the end of the memory chip boom cycle.

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