Storage Giants Crash: $43B Wiped Out Despite Record Profits and Burry’s Short

Woofun AI reports that a severe market correction struck the global storage sector on July 28, erasing approximately $43 billion in combined market value from industry leaders including SK Hynix, Samsung Electronics, Micron, SanDisk, Seagate, and Western Digital within a single trading session.

The financial impact was immediate and disproportionate to recent earnings reports. SK Hynix and Samsung Electronics each declined by more than 13%, resulting in a joint market value loss of roughly $28 billion. Simultaneously, Micron fell 8.85%, SanDisk dropped 14.25%, Seagate decreased by 8.53%, and Western Digital slid over 6.9%, contributing an additional $14.8 billion in losses. Historical pullback data reveals the severity of the trend: SK Hynix has retraced between 45% and 47% from its June peak, wiping out nearly $600 billion in value. Micron Technology has experienced a pullback exceeding 30% from its highs, while Japan’s Kioxia has seen its market value shrink by nearly half in just one month. In Seoul, trading screens at Hana Bank reflected this volatility, displaying the closing prices of the benchmark KOSPI index alongside the steep declines in Samsung and SK Hynix shares.

Samsung Electronics presented a stark paradox in its financial reporting. On July 7, the company released preliminary second-quarter results showing an operating profit of 89.4 trillion won, an 18-fold year-on-year increase that surpassed the total profit generated across the years 2023 to 2025. Despite this record-breaking performance, the stock price plunged over 10% during the day, dragging the KOSPI index down by nearly 5%. The market’s rejection of these fundamentals suggests that investors are pricing in future risks rather than celebrating current profitability.

SK Hynix and Micron similarly delivered record-breaking results that failed to support their valuations. On July 29, SK Hynix announced second-quarter revenue of 79.3 trillion won, a 257% year-on-year increase, with an operating profit of 60.5 trillion won, up 557% year-on-year, pushing the operating profit margin to 76%. For the fiscal quarter ending May 2026, Micron Technology reported revenue of $41.5 billion, a 346% surge, with gross margins soaring to 84.6% and free cash flow reaching $17.6 billion. Micron management stated that demand far exceeds supply capacity and will continue until 2028. Yet, these robust fundamentals were ignored by traders focused on structural shifts in capital flows.

Woofun AI data shows that cross-market arbitrage and regulatory changes acted as primary triggers for the sell-off. The issuance of SK Hynix ADRs in the U.S. enabled a strategy of going long on U.S. depositary receipts while shorting Korean local stocks. Bloomberg cited a UBS report noting that global portfolio managers could now purchase SK Hynix ADRs, creating a "risk-free trade" by buying U.S. receipts and selling Korean common stocks.

Additionally, on July 16, the Financial Services Commission of Korea tightened regulations on single-stock leveraged ETFs, raising the minimum margin requirement from 10 million won to 30 million won and limiting purchases to 20 shares per transaction. J.P. Morgan analyst Nikolaos Panigirtzoglou noted that leveraged ETF holdings for memory chips were three times the market value of ordinary stock ETFs. This regulatory shift triggered mandatory rebalancing and programmatic selling, causing SK Hynix to fall over 11% and Samsung to drop over 8%, sparking panic across European and U.S. markets.

Longer-term concerns regarding AI capital expenditure imbalances further exacerbated the decline. On July 22, Google raised its full-year capital expenditure forecast from $180 billion to a range of $190 billion to $205 billion, yet its stock price fell due to concerns that relentless spending was suppressing free cash flow. This issue affects Microsoft, Amazon, and Meta similarly. Moody’s warned that the nearly $1 trillion annual AI arms race is forcing cash-rich giants to rely on debt, with the total direct debt of six major cloud providers reaching about $460 billion. Shinhan Securities analyst Jiang Zhenhe summarized that investor attention has shifted to the sustainability of the AI investment cycle and concerns about the competitiveness of the Chinese storage industry, igniting risk aversion.

Michael Burry, known for "The Big Short," publicly disclosed a heavy short position in the storage sector, increasing his bets during the panic. On July 2, he established a short position in Micron at $105.18. By July 25, he added shorts in Micron at $93.39 and Nvidia at $210.28, while also shorting the SOXX semiconductor ETF. Burry’s thesis rests on three pillars: first, Micron’s valuation deviation from its 200-day moving average is at its highest since 1984, exceeding the 2000 internet bubble peak, despite 34 instances of declines over 30% in its 42-year history. Second, capital returns are mediocre, with a long-term median ROIC of only 4% and ROE of 7%, with one-third of quarters historically in "capital destruction." Third, end-user demand is inflated by off-balance-sheet financing, citing the Bank for International Settlements (BIS) 2026 annual report. Burry predicts a sector correction of at least 30%.

Counter-arguments from bulls highlight that Micron’s quarterly report was historically impressive, with record revenue, margins, and cash flow.

However, CoinCentral analysis suggests Burry is not betting on an immediate demand collapse but on uncontrolled capital expenditures. Micron’s own capital expenditure of $27 billion is viewed as sowing the seeds for a crash in the next downturn, as manufacturers expand capacity despite current tightness.

The industry’s recent "super alliances" have not stabilized sentiment. At the San Francisco AI summit on July 24-25, SK Group signed a $500 billion agreement with Nvidia for HBM supply and HBM4 development, plus collaborations with Microsoft and Anthropic totaling $750 billion. Samsung signed a $200 billion memorandum with Broadcom, bringing the combined order total to $950 billion. AMD acquired MEXT to use flash memory to reduce DRAM costs, while Meta and SanDisk locked in NAND supply. Despite these deals, the Korean government’s plan to invest 800 trillion won ($516 billion) with Samsung and SK Group to build four new wafer fabs, alongside a 550 trillion won HBM hub, totaling 1,350 trillion won ($880 billion) or 5% of Korea’s 2024 GDP, shattered the illusion of sustainable high prices.

SK Hynix’s 2026 capex is expected to jump 43% to 40 trillion won, and Micron’s 2026 capex will double. Morningstar analyst Jing Jie Yu warned that new capacities coming online in 2027 and 2028 will cause severe price erosion. AInvest noted this mirrors the 2022 to 2023 oversupply crash. Although it takes 18 to 24 months for fabs to come online, with Samsung’s P5 factory scheduled for the second half of 2027, TrendForce believes the supply-demand imbalance will not fundamentally change before then, but the market trades on expectations.

The sentiment shift indicates a fundamental disconnect between current earnings and future supply risks. Standard Chartered Bank Chief Investment Officer Sundeep Gantori stated that the selling reflects a deterioration in semiconductor sentiment, with some institutions predicting storage prices will peak in 2027. The real examination for the industry will be the concentrated mass production of new factories in the second half of 2027 to 2028, as anticipated by Burry. This marks a pivotal moment where capital markets are pricing in potential oversupply years in advance, signaling a transition from a demand-driven boom to a supply-constrained bust cycle.