Citron Takes Aim at SanDisk's Valuation Bubble
In a recent report, short-seller Citron has taken aim at SanDisk, arguing that its valuation is significantly out of line with its underlying business fundamentals. While some investors have drawn comparisons to NVIDIA, Citron stresses that this analogy is flawed. NVIDIA benefits from strong technological moats, whereas SanDisk operates in a highly commoditized market with limited pricing power.
Insider Selling Signals Concern
Notably, Western Digital recently slashed its stake in SanDisk by more than 25% below market value — a move that Citron views as a major red flag. This insider selling suggests seasoned investors are already anticipating a peak in the memory chip cycle.
Historical Cycles Repeat
- Memory market peaked in 2008
- Similar peaks occurred in 2012 and 2018
- SanDisk is unlikely to defy this pattern
Citron argues that current supply constraints at SanDisk are merely temporary capacity bottlenecks — what the firm calls a "false shortage" that could vanish after a single earnings call.
Competitive Pressure Intensifies
Samsung, which has long prioritized market share over short-term profits, has now entered SanDisk's core customer base with high-end SSDs. The company has also pledged to sell only products with gross margins above 50%, further squeezing SanDisk's profitability.
The Bigger Picture: Cyclical Play
Citron emphasizes that this short position isn't just about SanDisk — it's a strategic bet against the broader memory chip cycle. As the market normalizes, the current valuation premium will likely evaporate, potentially leading to a significant drop in share price.