Behind the Sharp Drop in Storage: Buffett’s Warning and Three Major Negative Factors

Storage chip stocks saw violent swings this week, with multiple negative signals piling up and abruptly weighing on the prior rally driven by AI demand.

On Wednesday, Micron plunged 8.02%, SanDisk fell 8.12%, and Western Digital’s decline also exceeded 7%. SK Hynix’s U.S. depositary receipts (ADRs) slid 9% as well, giving back a large portion of the previous trading day’s gains; in Korean markets, SK Hynix dropped nearly 12% and Samsung Electronics fell more than 9%.

The immediate trigger for this round of selloff was Buffett’s warning that AI-themed speculation is rampant and the market has become hard to find genuine value, although he did not name any specific company.

Meanwhile, 广发香港 lowered its third-quarter DRAM price growth forecast during its monthly call, citing strong resistance from customers to a near 30% price hike.

This decline reflects the storage sector’s key current contradiction: fundamentals data remains strong, but the risk of specification cuts on the demand side and supply-expansion expectations is eroding market confidence in the sustainability of high pricing.

Buffett’s remarks spark a reversal in sentiment

This week’s performance for Micron is nothing short of a “roller coaster.”

On July 13 (Monday), the stock fell 4.3%, closing at $937. On July 14 (Tuesday), after KeyBanc raised its price target to $1,750 and expected the storage shortage to continue through 2027, the stock rebounded 4.7%, briefly hitting $994.80 intraday. On July 15 (Wednesday), Buffett’s comments caused market sentiment to swing sharply lower; the stock once dropped to around $865, and its market cap retreated to about $1.05 trillion.

Buffett’s exact words were that when everyone is eager to “gamble” on themes like AI, finding investments with real value becomes “increasingly difficult.”

While the remarks were not aimed at Micron, they precisely hit the soft underbelly of the storage stocks’ recent trading pattern—investors react to every piece of news as if betting on up or down moves, rather than making long-term judgments based on fundamentals.

A market observer noted that SK Hynix’s trading action after listing on Nasdaq last week was a snapshot of this “gambling mentality”: investors initially bought heavily after the company’s CEO, Arvind Krishna, said customer spending had shifted to storage products, but then quickly sold off due to concerns that SK Hynix’s expansion plans would push down industry pricing.

DRAM price hikes face resistance

During its monthly call, 广发香港 said customers’ resistance to nearly a 30% DRAM price increase was strong, prompting the firm to slightly lower its third-quarter DRAM price growth forecast.

This stance contrasts with KeyBanc’s earlier view that DRAM prices in the third quarter would rise 15% to 20%, showing that bargaining power on the demand side is constraining pricing expectations on the supply side.

广发香港 also noted that DDR5 specifications for standard servers are expected to be lowered by about 50% versus earlier forecasts. DRAM suppliers are rolling out new RDIMM and MRDIMM products of 96GB or 64GB, and the latter is expected to become the new mainstream specification.

In addition, according to 广发香港’s analysis on July 2, the LPDDR5X capacity in NVIDIA’s VR200 NVL72 racks has been substantially reduced, and in extreme scenarios it could fall to one quarter of the original specification. This would compress LPDDR5X costs from a possible rise to $1.2 million down to about $293k.

The firm also expects NVIDIA Vera CPU racks to adopt a 96GB SOCAMM方案 as well; total memory capacity would drop from 1.5TB shown in the spec sheet to 768GB, which could delay delivery timelines accordingly.

NAND and HBM become the new points of disagreement

Despite the increasingly cautious outlook for DRAM, 广发香港’s stance on NAND flash has clearly turned more optimistic.

The firm said demand for KV cache offloading has continued to exceed expectations, and there is also an emerging trend in the market to replace expensive DRAM with NAND; together, these support NAND demand.

KeyBanc analyst John Vinh maintained a positive view on the overall storage market, expecting NAND price increases of 30% to 40% in the third quarter, followed by another 15% in the fourth quarter; HBM prices may more than double next year. HBM is key companion storage for AI processors, and Micron is one of NVIDIA AI processors’ HBM suppliers—this positioning deeply embeds Micron in the AI hardware supply chain.

广发香港 is optimistic about SK Hynix’s second-quarter performance, expecting revenue of 85 trillion won and a gross margin of 63%.

SK Hynix ADR premium faces pressure to narrow

SK Hynix ADR fell 9% on Wednesday to $176.46, while its shares in South Korea closed up 8.8% the same day—clearly diverging in performance.

After a 27% surge on Tuesday, SK Hynix’s forward P/E ratio for its ADRs had risen to about 6.2 times, converging toward valuation levels of Micron, its competitor. Previously, the ADR’s discount relative to local shares was one of the reasons some investors bought.

At present, the premium of SK Hynix ADR over its local shares had at one point exceeded 50%.

South Korea’s depository receipts institution is expected to open two-way conversions between local shares and ADRs on July 29. At that time, this premium space may narrow significantly, creating potential pressure for ADR holders.

Strong fundamentals can’t hide cycle-related risks

Even though near-term sentiment is swinging sharply, Micron’s fundamentals data remains impressive.

The company’s latest fiscal-quarter revenue reached $41.5 billion, up 346% year over year. Net profit surged nearly 1,400% to $28.2 billion. Adjusted earnings per share were $25.11. Micron has signed supply commitment agreements for $22 billion in storage-chip shipments with 16 strategic customers. The agreements include “take-or-pay” terms, cash deposits, and price floors, providing a demand anchor that goes beyond day-to-day market volatility.

However, cycle-related risks in the storage industry remain unresolved.

Micron’s capital expenditures this year are about $27 billion, and SK Hynix and Samsung Electronics are also ramping up expansion at large scale. Once supply catches up with demand, the current pricing power will face severe tests.

Whether the core assumption behind the bullish logic—that the duration of supply tightness lasts longer than historical cycles—can hold true is still the biggest market uncertainty.