Shares of major memory chipmakers declined on Thursday, reversing some of the previous session's gains, as a sharp drop in Alphabet's stock and a disappointing earnings report from Samsung Electronics weighed on the sector. Micron fell about 3.5%, SK Hynix slipped around 1%, and SanDisk dropped approximately 2.71%.
The pullback came after Alphabet, Google's parent company, reported third-quarter revenue and earnings below expectations, renewing concerns about the escalating costs of artificial intelligence infrastructure and the sustainability of spending across the tech sector. Although Google Cloud revenue more than doubled, investors focused on slowing growth in its core search advertising business, which expanded 12%, and a negative free cash flow of over $9 billion, compared with analysts' expectations for a deficit of $2.70 billion.
Investors were also digesting fresh inflation data following the Federal Reserve's decision to hold interest rates steady, adding to uncertainty across technology and semiconductor stocks. The Philadelphia Semiconductor Index slipped by over 0.6%.
Samsung shares slide despite record profit
Samsung Electronics shares plunged more than 4% in Seoul on Thursday, even as the company reported a record quarterly operating profit of $80 billion. Investors focused on revenue and semiconductor earnings that fell short of expectations. The company reported revenue of 195.3 trillion won ($124 billion), slightly below analysts' estimates of 195.79 trillion won, while semiconductor operating profit came in at 106.5 trillion won, versus Bloomberg's estimate of 108.45 trillion won.
Cash flow from operating activities also declined to 98.6 trillion won in the third quarter from 105.1 trillion won in the previous quarter. The decline came amid concerns over the scale of investment in AI infrastructure and the risks facing the memory chip industry if demand weakens. South Korea's central bank recently warned that the country's dependence on semiconductor exports could leave its economy more vulnerable to a downturn in AI demand.
Investors had been looking for Samsung to benefit from strong results reported by rival SK Hynix. "SK Hynix did quite a lot more than expected yesterday. It went beyond market expectations, but Samsung Electronics hasn't really changed its earlier guidance," said Lee Min-hee, an analyst at BNK Investment & Securities.
SK Hynix outlook had lifted memory shares
The pullback followed a rally in memory stocks on Wednesday after SK Hynix reported better-than-expected earnings and outlined plans to return about $75 billion to shareholders this year. The South Korean chipmaker also projected that the shortage of memory components would persist through 2030, reinforcing expectations that demand could remain strong for an extended period.
Rosenblatt Securities analyst Kevin Cassidy told MarketWatch that SK Hynix's report showed memory demand increasing as part of an "upcycle", providing a major boost to profits. "The market's concern in memory has been the cyclical nature of the memory market," Cassidy said. However, the current period of strength "has lasted longer than any other upcycle in history," he added.
The outlook had helped fuel optimism that rising demand for memory components used in AI infrastructure could support pricing and earnings across the sector.
SanDisk faces earnings test after rally
SanDisk shares also came under pressure ahead of the company's fiscal first-quarter 2027 earnings report, scheduled for release after the market close on Thursday. The stock had surged in the previous session following SK Hynix's record quarterly results, which confirmed that NAND prices rose at a mid-20% rate quarter-on-quarter. The gains gave way to caution ahead of SanDisk's own results.
Options markets are pricing in a potential share-price move of nearly 10% in either direction following the earnings announcement, reflecting elevated expectations and uncertainty about the company's outlook. The pullback was compounded by Cantor Fitzgerald's decision to lower its price target on SanDisk, citing concerns about the pace of revenue growth while maintaining an Overweight rating.
Analysts broadly remain bullish, with consensus estimates calling for earnings of about $46 per share on revenue near $10.7 billion, representing a substantial year-on-year increase. However, expectations are high after SanDisk beat estimates in each of its previous four quarters. Any disappointment in guidance for NAND pricing or second-quarter revenue could trigger a sharp market reaction.
With SanDisk due to report after the close and options implying a move of nearly 10%, the stock is likely to be a busy one on trading apps tonight.
This article is for informational purposes only and does not constitute financial advice.
