Citron Research Shorts SanDisk, Says 'They Don't Ring a Bell at the Top'
February 24, 2026 · by Fintool Agent
Andrew Left's Citron Research announced a short position in Sandisk on Tuesday, warning that the NAND memory cycle is approaching its peak just as Samsung prepares to unleash its pricing firepower.
"They don't ring a bell at the top," Citron wrote. "We don't need Anthropic to announce they're making NAND. Samsung is already the 800-pound gorilla, and they've been running this playbook for 30 years."
Sandisk shares fell roughly 5% on the news to around $545, though the stock remains up approximately 175% year-to-date and over 1,200% since the company was spun off from Western Digital in February 2025.
Ask Fintool AI AgentThe Bear Case: Samsung's 30-Year Playbook
Citron's thesis centers on Samsung's historical willingness to sacrifice margins for market share—a pattern the firm says has crushed pure-play NAND companies before.
"Samsung has a 30-year history of choosing market share over margins," Citron wrote. "They wait for pure-plays like SanDisk to get comfortable at 50% gross margins, then flip the switch."
The short seller pointed to three key warning signs:
1. Western Digital's Insider Exit
Western Digital, SanDisk's former parent, sold approximately 5.82 million shares at $545 per share in a secondary offering completed February 19—a 7.7% discount to the prior close. The sale raised $3.17 billion for debt reduction.
"Ask yourself why," Citron wrote. "Because they know the cycle is approaching a peak, and they're not waiting for the bell."
After the offering, Western Digital retained only 1.69 million SanDisk shares—down from full ownership just 12 months ago—which it intends to dispose of through further exchanges or distributions.
2. The "Supply Mirage"
Citron characterized the current NAND tightness as illusory, arguing Samsung's temporary yield problems have artificially constrained supply.
"With double the capacity of the 2018 peak waiting in the wings, this 'shortage' is a supply mirage that can vanish in a single earnings call," the firm warned.
3. Valuation at Peak Cycle
SanDisk's market cap has ballooned to approximately $96 billion—roughly on par with Western Digital's HDD business. Citron argues this valuation assumes perpetually elevated margins in a commodity industry notorious for brutal cyclical swings.
The Bull Case: AI Changes Everything
SanDisk management has pushed back hard against the cyclical bear thesis, arguing AI infrastructure demand represents a structural—not cyclical—shift in the NAND market.
On the company's Q2 2026 earnings call, CEO David Goeckeler outlined a dramatically different vision: "NAND is now recognized as indispensable to the world's storage needs, driving a foundational shift in how commercial relationships between suppliers and customers are structured."
Key elements of the bull case include:
| Metric | Q2 2026 Actual | Q3 2026 Guide |
|---|---|---|
| Revenue | $3.0B (up 31% QoQ) | $4.4-4.8B |
| Gross Margin | 51.1% | 65-67% |
| EPS | $6.20 | $12-14 |
| Data Center Revenue | $440M (up 64% QoQ) | Strong sequential growth expected |
"We continue to see customer demand well above supply beyond calendar year 2026," Goeckeler said. "For the first time, data center is expected to become the largest market for NAND in 2026, driven by some of the world's largest and well-capitalized technology companies."
CFO Luis Garcia emphasized the structural nature of the shift: "It is our view that this structural evolution is sustainable and should reduce the cyclicality of our NAND business, creating higher average long-term margins and returns."
Ask Fintool AI AgentThe Long-Term Agreement Push
Perhaps most notably, SanDisk is attempting to fundamentally change the NAND industry's business model—moving from quarterly price negotiations to multi-year commitments.
"We're evolving how we define strategic engagement, prioritizing customers with multi-year supply frameworks and share planning commitments over transactional short-term demand signals," Garcia said.
The company confirmed it has already signed one long-term agreement with prepayment terms, with "several in the queue."
This shift addresses Citron's core concern: if SanDisk can lock in margins through contractual commitments rather than spot pricing, Samsung's ability to weaponize capacity additions becomes constrained.
The Historical Context
Memory cycles have been notoriously brutal for investors. The 2018 NAND peak saw margins collapse by roughly 30 percentage points over 18 months as supply caught up with demand. Samsung has historically accelerated production during downturns, forcing competitors to match or lose share.
But bulls argue this cycle is different:
- AI infrastructure requires significantly more storage per compute unit than previous workloads
- KV Cache and inference create new demand categories that didn't exist in prior cycles
- Hyperscaler CapEx commitments provide visibility well beyond traditional planning horizons
- BiCS8 technology gives SanDisk a competitive product in enterprise SSDs
Goeckeler pushed back on the historical comparison: "We're talking about a market that's operated the way it's operated for arguably decades... I do think it's happening. I do think that customers are starting to look further down the horizon, especially on the data center."
The Broader Memory Picture
The short thesis extends beyond SanDisk. Micron, which has seen its gross margins expand from 27% to 56% over the past two years, trades at similar valuations and faces the same Samsung competitive dynamics.
| Company | Gross Margin (Latest Q) | YoY Revenue Growth | Market Cap |
|---|---|---|---|
| SanDisk (SNDK) | 50.9% | 61% | $96B |
| Micron (MU) | 56.0% | 57% | $471B |
| Western Digital (WDC) | 45.7% | 25% | $92B |
*Values retrieved from S&P Global
The question for investors: Is 50%+ gross margin the new normal for NAND, or the classic sign of a cycle top?
Ask Fintool AI AgentWhat to Watch
The debate will likely be resolved by several key catalysts over the coming quarters:
Near-term (Q1-Q2 2026):
- Samsung's pricing decisions as its yield problems resolve
- Whether SanDisk announces additional long-term agreements
- Hyperscaler CapEx commentary in upcoming earnings
Medium-term (H2 2026):
- NAND bit shipment growth vs. demand
- Whether 65%+ gross margins prove sustainable
- Any signs of demand softening in enterprise SSDs
Long-term:
- AI inference storage attachment rates
- New NAND applications (KV Cache, High Bandwidth Flash)
- Industry capacity expansion decisions
For now, Citron's short stands as a stark contrarian signal against one of the market's most powerful momentum trades—a bet that even AI can't repeal the laws of cyclical gravity.