Sandisk "flash crash"! Short seller Citron points out that supply tightness is a "mirage," and the cycle is about to peak

After the well-known short seller Citron Research announced its short position, the stock price of the storage chip "darling" SanDisk plummeted during trading.

On Tuesday, the 24th, Eastern Time, Citron posted on social media stating that there is a fundamental error in the market's pricing logic for SanDisk, and the current tight supply of storage chips is merely an "illusion," with the peak of the cycle approaching. Following the post, SanDisk (SNDK) saw its stock price dive in early trading on Tuesday, with the decline at one point expanding to 5.7%. Initially, it briefly turned positive at midday, but the decline again widened, exceeding 6%.

Before Citron's short-selling statement, SanDisk's stock price had already risen nearly 40% over the past month, approximately 175% since the beginning of 2026, and surged over 1200% in the past 12 months. Citron's involvement has raised doubts in the market about the sustainability of this strong stock and has reignited investor concerns about the economic cycle of the storage chip industry.

On the retail platform Stocktwits, the sentiment related to SNDK has shifted to "bearish" in the past 24 hours, although the discussion volume remains low. Some users on the platform have reservations about Citron's judgment.

One user, thealster, stated that while Citron's short report is directionally correct, the timing may be about two years early. He pointed out that currently, Samsung is profiting more from high-bandwidth memory (HBM) chips for NVIDIA products than from its NAND flash memory business, and the two companies are "heading in different directions."

Three Main Arguments: Why Citron is Bearish on SanDisk

Citron's short-selling logic revolves around three main lines: the competitive threat from Samsung, the selling signal from long-term investor Western Digital, and historical patterns of cycle peaks.

Regarding the competitive threat from Samsung, Citron pointed out that Samsung Electronics has a 30-year strategy of prioritizing market share over profits. When pure storage manufacturers like SanDisk enjoy high margins, Samsung significantly expands production and lowers prices.

Citron believes that this round of threats is particularly severe: Samsung recently publicly stated that it would not sell products below a 50% gross margin, while also introducing its most advanced chips into SanDisk's core battlefield—the high-end solid-state drive (SSD) market. Citron wrote, "They are not just a capacity gorilla; they are directly targeting SanDisk's premium customers with newer, cheaper technology."

Citron also cited another key signal—Western Digital recently sold a large number of shares of SanDisk at a price about 25% lower than the current market price, with the proceeds used to pay off debt. Citron believes this move is not coincidental but rather an early judgment by Western Digital that the storage cycle is about to peak. "The TV guests are still banging the table, pushing retail investors into the bull pen, but long-term shareholder Western Digital has quietly been unloading," Citron wrote In terms of the logic of the cycle reaching its peak, Citron compares the current supply tightness in the storage market to a "mirage," believing its root cause lies in a temporary bottleneck in another product line of Samsung, which has a clear "expiration date."

Citron warns that there is already capacity equivalent to twice the peak production capacity of 2018 ready to be unleashed, and once it hits the market, the supply-demand dynamics could be completely reversed in "one earnings call."

Citron also draws a comparison between SanDisk and NVIDIA: "The market is pricing SanDisk like NVIDIA, but there is one problem: NVIDIA has a moat, while SanDisk sells commodities."

Full Post by Citron

Below is the full post that Citron published on social media platform X at the beginning of the U.S. stock market on Tuesday:

“ Citron is shorting SanDisk (SNDK) — The alarm will not ring at the top

We don’t need Anthropic to announce its entry into NAND flash memory to short SanDisk. Samsung has long been that 800-pound gorilla, and they have been using this playbook for 30 years.

TV guests are still banging the table, pushing retail investors into the bull pen, but long-term investor Western Digital just sold a large amount of shares at a price 25% below the current market price just a few days ago.

Ask yourself why. Because they know the cycle is approaching its peak, and they won’t wait for the bell to ring.

The market is pricing SanDisk like NVIDIA (NVDA). But there is one problem: NVIDIA has a moat, while SanDisk sells commodities.

In 2008, 2012, and 2018, we have seen similar situations. This time is no different. The memory market is cyclical, and cycles always reach a peak.

For 30 years, Samsung has chosen market share over profit margins. They wait until pure SSD companies like SanDisk become complacent at a 50% gross margin, then they strike. But this time it’s worse. All investors who are bullish on SanDisk should read this article: Samsung just announced that they will not sell any products with a gross margin below 50% and will send their best chips into the high-end SSD market that SanDisk relies on for survival. Samsung is no longer just a capacity giant. They are stealing SanDisk's premium customers with cheaper, newer technology. And what is currently causing the supply tightness? A temporary yield issue in another product line of Samsung.

This bottleneck will eventually pass.

There is capacity waiting to enter the market that has reached twice the peak of 2018, and this so-called "supply shortage" is nothing but a mirage, likely to disappear in one earnings call.

To put it another way: shorting SanDisk is like sliding to the end of an ice hockey rink. When the market cycle normalizes, the stock price will drop even lower.”

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk