AI memory chip euphoria hits its sharpest valuation test as SK Hynix plunges 9% after Sandisk and Western Digital disappoint

SK Hynix's 9% selloff on August 6 was triggered by guidance from two companies that do not make high-bandwidth memory, the product that underpins SK Hynix's AI-driven valuation.

Western Digital, a data storage company, plunged roughly 10% in after-hours trading on August 5 despite beating Wall Street estimates on every headline metric. Even the company's own forward guidance exceeded consensus: its revenue forecast midpoint of $4.1 billion topped the $4.06 billion FactSet estimate, and adjusted earnings per share guidance midpoint of $4.00 surpassed the $3.84 consensus. The problem was deceleration, not decline. Sequential quarterly revenue growth slowed from 12.3% to 9.4%, adjusted earnings per share growth dropped from 30.9% to 12.4%, and gross margin expansion compressed from 390 basis points to 110 basis points. Western Digital shares had nearly tripled in 2026 before the report 1. Sandisk, the NAND flash company spun off from Western Digital, fell about 8% after its profit outlook came in below elevated market expectations 2. The next morning, the damage spread across Asia: SK Hynix fell nearly 9%, Samsung Electronics dropped about 6%, and South Korea's KOSPI slid roughly 4% 2.

Storage guidance, HBM panic

Western Digital's fourth-quarter revenue was 89% cloud, driven primarily by nearline hard disk drive shipments to hyperscalers 1. SK Hynix's premium valuation rests on a different product: high-bandwidth memory (HBM), the stacked DRAM chips used inside NVIDIA accelerators and Google's Tensor Processing Units. SK Hynix holds 62% of global HBM shipments as of Q2 2025 and 57% of HBM revenue as of Q3, according to Counterpoint Research 3.

HBM is structurally supply-constrained in a way that nearline storage is not. Micron has noted a 3-to-1 ratio between HBM and DDR5 wafer capacity, meaning every HBM production ramp directly compresses general-purpose DRAM supply 4. Goldman Sachs expects SK Hynix to hold over 50% of the HBM market through at least 2026, with demand locked into multi-year supply agreements tied to confirmed AI accelerator production schedules 34. Bank of America estimates the 2026 HBM market at $54.6 billion, up 58% year-over-year, and named SK Hynix its top stock selection for the global memory industry 3.

The transmission from a storage company's guidance miss to a 9% drop in the leading HBM supplier runs through one variable: cloud capital expenditure. If hyperscaler spending cools, traders reason, it eventually hits both storage orders and HBM allocations. The problem is timing and contractual structure. Storage demand tracks current cloud budgets within a quarter or two. HBM supply is allocated years ahead against confirmed AI chip production roadmaps from NVIDIA, Google, and others. A deceleration in nearline hard disk drive shipments does not mechanically cancel HBM orders already committed for 2026 and 2027.

Two corrections in three weeks

The August 6 plunge was the second sharp selloff in the memory sector within three weeks:

• July 28-29: More than $1 trillion erased from the world's most valuable chip stocks. SK Hynix closed 9.61% lower after dropping over 15% intraday, missing analyst estimates despite posting record quarterly revenue. Samsung lost $173 billion in market cap, Micron $113 billion 5
• Early August: A modest recovery emerged across the memory sector 2
• August 5: Western Digital beats estimates but plunges roughly 10% after-hours as sequential growth decelerates across revenue, earnings, and margins 1
• August 6: SK Hynix falls 9%, Samsung 6%, Kioxia 8.5%, CXMT 4%, SMIC 4.3% 2

The Philadelphia semiconductor index (SOX) had risen 92% over the previous twelve months before shedding nearly 20% in the month leading into the first correction 5. Even after that July rout, SK Hynix missed estimates with record numbers, meaning expectations had climbed past the strongest quarterly performance in the company's history 5.

What would prove the selloff right or wrong

Forrester VP and principal analyst Charlie Dai described the broader dynamic as "less about weakening AI demand and more about a repricing of expectations after an exceptionally strong rally" 5. Aberdeen Investments investment director Kieron Poon said the pullback had brought valuations to "more attractive levels" and that the volatility had not changed the firm's long-term positive view 5.

The deciding data point is SK Hynix's own HBM pricing in its next quarterly report. If average selling prices for HBM hold or tighten while NAND pricing softens, the storage-driven selloff will have punished the wrong product. If HBM pricing also weakens alongside storage, the correlation was the signal, and AI infrastructure demand carries more cyclicality than record valuations implied.