SanDisk "Flash Crash"! Bearish Citron claims supply shortages are a "mirage," and the cycle is about to peak

After well-known short seller Citron Research announced a short position, the storage chip “darling” SanDisk (SNDK), fueled by the AI boom, saw its stock price plummet during trading.

On Tuesday, the 24th of Eastern Time, Citron posted on social media claiming that there is a fundamental flaw in the market’s valuation logic for SanDisk. They argued that the current storage chip supply shortage is just a “mirage,” and the cycle top is near. Following the post, SanDisk’s stock price immediately dropped in the morning, with a decline of up to 5.7%. It briefly turned positive at the start of the midday session but then fell again, reaching an 8% decline at one point, before closing down 4.2%.

Before Citron’s short report, SanDisk’s stock had already risen nearly 40% over the past month, about 175% since 2026, and surged over 1,200% in the past 12 months. Citron’s intervention has raised doubts about the sustainability of this strong rally and reignited investor concerns about the storage chip industry’s cyclical health.

On the retail platform Stocktwits, sentiment related to SNDK shifted to “bearish” within the past 24 hours, though discussion volume remains low. Some platform users expressed reservations about Citron’s judgment.

One user, thealster, commented that Citron’s short thesis is correct but the timing might be about two years early. He pointed out that Samsung is now more profitable in high-bandwidth memory (HBM) chips supporting Nvidia’s products than in NAND flash memory, indicating different strategic directions for the two companies.

Three Main Reasons Citron Is Bearish on SanDisk

Citron’s bearish thesis revolves around three main points: the threat from Samsung’s competitive strategy, signals from Western Digital (a long-term investor in SanDisk) reducing its holdings, and the historical cycle peak pattern.

Regarding Samsung’s competition, Citron notes that Samsung Electronics has a 30-year history of prioritizing market share over profit, often sacrificing margins to expand capacity and lower prices when pure storage companies like SanDisk enjoy high gross margins.

Citron believes this threat is especially severe now: Samsung recently stated it will not sell products below a 50% gross margin and is integrating its most advanced chips into SanDisk’s core market—high-end SSDs. They wrote, “They’re not just a capacity giant; they’re using newer, cheaper technology to directly target SanDisk’s premium customers.”

Citron also highlighted a key signal: Western Digital recently sold a large portion of its SanDisk holdings at a price about 25% below the current market value, using the proceeds to pay down debt. Citron interprets this as no coincidence—an early sign that Western Digital anticipates the storage cycle is nearing its peak. “TV guests are still pounding the table, pushing retail investors into the bull market, but Western Digital has quietly offloaded shares long ago,” Citron wrote.

On the cyclical peak argument, Citron compares the current storage market’s supply tightness to a “mirage,” attributing it to a temporary yield bottleneck in Samsung’s other product line, which has a clear “expiration date.”

Citron warns that capacity equal to twice the 2018 peak is already in the pipeline, and once it hits the market, the supply-demand balance could reverse dramatically in a single earnings call.

They also draw a comparison between SanDisk and Nvidia: “The market is pricing SanDisk like Nvidia, but there’s a problem: Nvidia has a moat, SanDisk sells commodities.”

Full Citron Post

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

Citron Short on SanDisk (SNDK)—The Alarm Won’t Ring at the Top

We don’t need Anthropic to announce entering NAND flash to short SanDisk. Samsung has been that 800-pound gorilla for 30 years, and they’ve been using this approach all along.

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

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

The market is valuing SanDisk like Nvidia (NVDA). But here’s the problem: Nvidia has a moat, SanDisk sells commodities.

We’ve seen similar situations in 2008, 2012, and 2018. This time is no different. Memory is a cycle, and cycles always reach a peak.

Samsung has prioritized market share over profit margins for 30 years. They wait until companies like SanDisk, which focus solely on SSDs, operate at 50% gross margin, then they strike. But this time, it’s worse. All investors bullish on SanDisk should read this: Samsung just announced they will not sell any products with less than 50% gross margin and will send their best chips into SanDisk’s core high-end SSD market. Samsung is no longer just a capacity giant; they’re using cheaper, newer technology to steal SanDisk’s premium customers. And what’s the only reason for the current supply tightness? A temporary yield issue in Samsung’s other product line.

This bottleneck will eventually pass.

Capacity already twice the 2018 peak is waiting to enter the market. This so-called “supply shortage” is just a mirage, likely to vanish in a single earnings call.

To put it simply: shorting SanDisk is like skating toward the end of the ice rink. When the market cycle normalizes, this stock’s price will fall even lower.