Bad news strikes! Chip giant plunges! "Big bull stock" SanDisk faces reduction in holdings

Storage Chip “Big Stock” Suddenly Faces Reduction.

On February 17th, Eastern Time, the stock price of SanDisk, a major U.S. storage chip company, plummeted sharply, dropping as much as 6%. During after-hours trading in the U.S. stock market, its stock continued to decline, falling an additional 2%. According to reports, Western Digital announced it will sell all of its holdings of SanDisk common stock, with a transaction scale of approximately $3.09 billion (about 21.3 billion RMB). This may be the final step for this hard drive manufacturer to fully exit its former subsidiary a year after the spin-off.

Analysts pointed out that this share sale will enhance Western Digital’s capital allocation flexibility, strengthen its transition to a pure hard drive enterprise, and improve the company’s profitability quality and financial condition.

Sudden Announcement: Reduction of Holdings

On February 17th, local time, SanDisk issued a statement saying that Western Digital plans to sell its holdings of SanDisk common stock, totaling about $3.09 billion, but did not specify how many shares will be sold. SanDisk itself will not sell any shares nor receive any proceeds from this issuance.

As a result, SanDisk’s stock price fell 2% in after-hours trading. By the close on Tuesday, SanDisk’s stock had already dropped nearly 6%, while Western Digital’s stock price rose slightly.

According to the statement, Western Digital plans to exchange SanDisk shares for Western Digital debt held by affiliates of JPMorgan Securities and Bank of America Securities. After the transaction is completed, these affiliates will become selling shareholders, selling SanDisk shares on the secondary market through underwriters. The issuance is expected to be completed by February 19th local time, subject to usual closing conditions.

Evercore ISI analyst Amit Daryanani said that this transaction significantly accelerates Western Digital’s deleveraging process, and the company may shift toward a net cash position in the future. By repurchasing shares to reduce circulating stock, this deal is expected to boost Western Digital’s earnings per share by 4% to 6% in the short to medium term.

In fact, Western Digital’s reduction of holdings was anticipated. During a previous earnings call, CFO Kris Sennesael stated that the company planned to sell the remaining 7.5 million SanDisk shares before the one-year anniversary of the spin-off on February 24th.

According to registration documents filed with the U.S. Securities and Exchange Commission last year, Western Digital must complete the share sale by February 21st to avoid tax consequences.

Why the Large-Scale Reduction?

For Western Digital, this share sale will enhance its capital allocation flexibility. Daryanani noted that this transaction allows the company to prioritize stock buybacks, dividends, or strategic reinvestments, while consolidating its transition to a pure hard drive business, improving profitability quality, and optimizing financial health.

Western Digital management has stated that the proceeds from the sale will be used to further reduce debt. This aligns with Western Digital’s long-term strategy to focus on its hard drive business and fully exit the flash memory market.

According to the spin-off agreement completed on February 24th last year, Western Digital retained a certain amount of SanDisk shares but must dispose of them within a year to meet tax and regulatory requirements.

From stock performance, since the spin-off, SanDisk’s stock has continued to soar, with a total increase of over 1500% to date, and a 148.8% increase in 2026 alone, ranking first among S&P 500 component stocks. Western Digital’s stock has also risen 65%, ranking third.

Global flash memory shortages have driven DRAM (Dynamic Random-Access Memory) prices to continue rising since September last year.

According to earlier reports, supply chain insiders revealed that SanDisk has proposed a supply contract to some downstream customers, described by industry insiders as “unprecedented”: requiring customers to pay 100% cash in advance to lock in storage chip quotas for the next 1 to 3 years.

SanDisk is a leading developer, manufacturer, and supplier of data storage devices and solutions based on NAND flash memory technology. Its product portfolio includes solid-state drives, embedded products, memory cards, USB drives, wafers, and components, serving a broad customer base from consumers to large enterprises and public clouds.

Financial data shows that in the second quarter of fiscal year 2026, SanDisk achieved a profit of $803 million, compared to $104 million in the same period last year; quarterly revenue jumped from $1.88 billion to $3.03 billion, with adjusted EPS reaching $6.20, far exceeding analyst expectations of $3.62 and well above the company’s previous guidance.

SanDisk Chairman and CEO David Gokhner stated in a conference call that the company is at the center of extensive AI infrastructure expansion in data centers. As AI workloads grow, enterprise SSD demand accelerates across the ecosystem, especially as inference drives significant increases in NAND content per deployment. The company expects this business to grow significantly in the near and long term. All types of AI infrastructure builders are adopting the company’s products vigorously, including hyperscale cloud providers, edge and enterprise data centers, OEMs, and large-scale AI system integrators. The company’s technology has become a key driver for these deployments, providing the performance features needed to optimize AI infrastructure.

Benefiting from sharp price increases, SanDisk’s gross margin soared from less than 30% last quarter to 51.1% this quarter. SanDisk’s CFO expects non-GAAP gross margin to reach 65%–67% in the third quarter, with EPS guidance jumping from $6.20 this quarter to $12–14.

(Source: Securities Times)