Lemon sniper Sandisk (SNDK.US): Are you trying to trade it as NVIDIA Corporation (NVDA.US)? Dream on, you're just selling a commodity!

Benefiting from the supercycle of storage chips, SanDisk (SNDK.US) has been soaring all the way up until Tuesday when it was hit hard by the well-known short-selling institution Citron Research. The latter publicly announced that it had established a short position on SanDisk and sharply pointed out that the market's pricing of its stock is severely misjudged. As a result of this news, SanDisk's stock price dropped nearly 8% on Tuesday. Although this drop seems insignificant compared to its astonishing increase of about 175% so far this year and over 1200% cumulative return in the past year, the entry of the short-selling institution undoubtedly cast a long shadow over this rocketing rise. "NVIDIA Corporation has a moat, SanDisk sells commodities" Citron bluntly stated in a post on the social media platform X: "The market is pricing SanDisk the same way it prices NVIDIA Corporation (NVDA.US). But there's one problem: NVIDIA Corporation has a moat, while SanDisk sells a commodity." This comment directly addresses the core vulnerability of SanDisk's business model - the strong cyclicality of its NAND flash memory products. Citron believes that the current surge in demand and prices of NAND flash memory is a typical cyclical phenomenon, and this cycle is approaching its peak. They warned based on historical experience: "We have seen this scenario in 2008, 2012, 2018. This time will not be any different. Storage chips are a cyclical industry, and cycles always peak." Citron emphasized that the shortage of NAND memory supply may quickly reverse, even "disappear after an earnings conference call." Citron views industry giant Samsung Electronics (SSNLF.US) as the biggest threat to SanDisk and detailed Samsung's competitive strategy. The institution pointed out that Samsung has a 30-year history of prioritizing market share over profits. "They will wait until pure manufacturers like SanDisk feel comfortable at a 50% high gross margin, then 'flip the switch' and squeeze prices by increasing supply." More urgently, Citron observed that Samsung is changing tactics by directly encroaching on SanDisk's core territory. "Samsung just told the world that they will not sell products at a price below a 50% gross margin and are moving their best chips into the same high-end solid-state drive market as SanDisk." Citron warned that Samsung is no longer just a "gorilla" relying on capacity advantage; they are now competing for SanDisk's core customers with lower prices and more advanced technology. Important shareholder sales raise more doubts In addition to industry competition and cyclical factors, Citron also specifically pointed out another key signal: the ongoing divestment of long-term investor Western Digital Corporation (WDC.US). As SanDisk's former parent company, Western Digital Corporation is divesting its remaining shares through a series of secondary offerings. Citron commented on this, "While authoritative figures on television are urging retail investors to get on the 'bull market train,' long-term investor Western Digital Corporation sold a large amount of shares a few days ago at a price 25% lower than the current price. Ask yourself why. Because they know the cycle is nearing its peak, they will not wait for the bell to ring." Interestingly, shortly before Citron announced its short position, SanDisk had just released a second-quarter earnings report that far exceeded Wall Street's expectations. Thanks to the strong demand for enterprise SSDs in data centers, the company achieved significant revenue growth on a quarter-over-quarter basis and provided an optimistic outlook for the third quarter. This strong performance report had already pushed the stock price higher, making Citron's timing of shorting particularly significant. Currently, SanDisk is in a critical transition period. With Western Digital Corporation's exit, the company is striving to capitalize on the growth opportunities in NAND flash memory demand brought by AI and data centers as a completely independent entity. However, Citron's short-selling action undoubtedly casts an important vote in the market debate between cyclicality and structural growth. The company's next report for the third quarter, scheduled to be released on May 15th Eastern Time, will be the next key checkpoint to test market confidence and industry trends.