Key facts
- Sandisk and Western Digital shares declined significantly despite reporting quarterly revenues that surpassed analyst expectations.
- The companies' forward guidance failed to meet elevated market expectations, leading to investor skepticism.
- Sandisk posted record fourth-quarter revenue of $8.97 billion, while Western Digital reported $3.75 billion, up 44% year-over-year.
- Sandisk's first-quarter revenue forecast of $10.3 billion to $10.8 billion fell short of analyst estimates.
- Both companies have experienced substantial stock price increases over the past year, driven by AI spending.
Sandisk and Western Digital shares experienced significant premarket declines on Thursday, despite reporting quarterly revenues that surpassed analyst expectations. The market's reaction underscored the high bar set for AI-favored stocks, where even strong earnings can fail to satisfy investors following substantial year-to-date gains.
Sandisk shares fell 9.2%, while Western Digital shed 14.6%. Both companies have seen their stock prices more than triple or soar fivefold this year, driven by expectations that they would be major beneficiaries of Big Tech's artificial intelligence spending.
These gains have far outpaced the Philadelphia SE Semiconductor Index's nearly 70% rise and the S&P 500's 12.8% advance. A global shortage of high-end memory chips has contributed to rising chip prices, boosting industry revenues.
However, brokerage RBC Capital Markets noted that while Sandisk's long-term customer agreements provide business visibility, investor skepticism is likely to persist. The firm suggested that margins might be nearing their peak and price growth is moderating.
Sandisk forecast first-quarter revenue between $10.3 billion and $10.8 billion, and Western Digital expects $4.1 billion, plus or minus $100 million. Despite robust demand for AI data-center components, investors appear cautious about potential normalization of growth.
Other industry players also saw their stock prices fall, with Seagate Technology down 3.6%, Micron Technology off 3.7%, and U.S.-listed shares of SK Hynix sliding 6.2%. Intel, AMD, and Marvell Technology also experienced minor declines.
Analysts, however, continue to see data center demand as a positive driver for these companies. Sandisk, for instance, anticipates its data center revenue to more than quadruple by 2026 compared to 2025 levels, having doubled in the fourth quarter from the third.