Western Digital's stock fell 6.16% during the pre-market session, reflecting a severe downturn across the memory and storage chip sector.

The sell-off was primarily triggered by new regulatory measures from South Korea's Financial Services Commission targeting single-stock leveraged ETFs. The regulations, which raise margin requirements and restrict speculative trading, have accelerated the deleveraging of funds that had been active in memory stock trading, amplifying selling pressure. This action specifically impacted memory chip leaders, with the weakness spreading from Asian to U.S. markets.

Furthermore, the decline is part of a broader correction in the AI-driven memory chip rally. Investors are reassessing the sustainability of the AI spending boom, questioning future supply-demand dynamics, and taking profits from stocks that had seen substantial gains. The weakness in chips has increasingly dictated the overall movement of major U.S. stock indexes, with memory-chip makers among the biggest laggards in the recent market downturn.