A leading stock in memory chips has suddenly faced a major sell-off. On February 17, Eastern Time, shares of U.S. memory chip giant SanDisk Corp. experienced a sharp decline, dropping as much as 6% during the trading session. In after-hours trading, the stock continued to fall, decreasing by an additional 2%. The drop followed an announcement from Western Digital that it plans to sell all of its common shares in SanDisk Corp., a transaction valued at approximately $3.09 billion. This move is seen as the final step for the hard drive manufacturer to fully exit its former subsidiary, one year after the spin-off.

Analysts suggest that this share sale will enhance Western Digital's capital allocation flexibility, solidify its transition into a pure-play hard disk drive company, and improve its profitability and financial health.

In a statement released on February 17, SanDisk Corp. disclosed that Western Digital intends to sell its common shares, totaling around $3.09 billion, though the exact number of shares was not specified. SanDisk Corp. itself will not sell any shares and will not receive any proceeds from the offering.

As a result, SanDisk Corp.'s stock fell 2% in after-hours trading. By the close of trading on Tuesday, the share price had already dropped nearly 6%, while Western Digital's stock saw a slight increase.

According to the announcement, Western Digital plans to exchange SanDisk Corp. shares for Western Digital debt held by affiliates of J.P. Morgan Securities and BofA Securities. Upon completion of the transaction, these affiliates will act as selling shareholders and offload the SanDisk Corp. shares in the secondary market through underwriters. The offering is expected to conclude on February 19, pending standard closing conditions.

Amit Daryanani, an analyst at Evercore ISI, noted that the deal significantly accelerates Western Digital's deleveraging process and could position the company to achieve a net cash status in the future. By reducing the number of outstanding shares through stock repurchases, the transaction is projected to boost Western Digital's earnings per share by 4% to 6% in the near to medium term.

Western Digital's divestment was anticipated. During a recent earnings call, the company's CFO, Kris Sennesael, indicated plans to sell the remaining 75 million SanDisk Corp. shares before the one-year anniversary of the spin-off on February 24.

A registration filing submitted last year to the U.S. Securities and Exchange Commission required Western Digital to complete the share sale by February 21 to avoid tax implications.

For Western Digital, the share sale enhances capital allocation flexibility. Daryanani explained that the transaction allows the company to prioritize stock buybacks, dividends, or strategic reinvestment, while reinforcing its shift to a pure hard disk drive business, improving earnings quality, and optimizing its financial standing.

Western Digital's management stated that the proceeds from the sale will be used to further reduce debt. This aligns with the company's long-term strategy of focusing exclusively on the hard disk drive market and fully exiting the flash memory sector.

Under the spin-off agreement finalized on February 24 of last year, Western Digital retained a portion of SanDisk Corp. shares but was required to dispose of them within one year to meet tax and regulatory requirements.

Since the spin-off, SanDisk Corp.'s stock has surged dramatically, with cumulative gains exceeding 1,500%. Year-to-date in 2026, the stock has risen 148.8%, ranking it as the top performer among S&P 500 constituents. Western Digital holds the third position with a 65% increase.

A global shortage of flash memory has driven up prices of DRAM (dynamic random-access memory) since September of last year.

According to earlier reports, industry sources revealed that SanDisk Corp. has proposed an unprecedented supply contract to some downstream customers, requiring 100% cash prepayment to secure memory chip quotas for the next one to three years.

SanDisk Corp. is a leading developer, manufacturer, and supplier of data storage devices and solutions based on NAND flash technology. Its product portfolio includes solid-state drives, embedded products, memory cards, USB drives, wafers, and components, serving a broad customer base from consumers to large enterprises and public clouds.

Financial reports show that SanDisk Corp. achieved a profit of $803 million in the second quarter of fiscal year 2026, compared to $104 million in the same period last year. Quarterly revenue jumped to $3.03 billion from $1.88 billion a year earlier. Adjusted earnings per share reached $6.20, significantly surpassing analysts' consensus estimate of $3.62 and exceeding the company's previous guidance range.

In a conference call, SanDisk Corp.'s Chairman and CEO, David Goeckeler, stated that the company is at the center of the broad expansion of AI infrastructure in the data center segment. As AI workloads grow, demand for enterprise-grade SSDs is accelerating across the ecosystem, with inference driving a substantial increase in NAND content per deployment. He expects this business to experience significant growth both near-term and long-term. All types of AI infrastructure builders, including cloud hyperscalers, edge and enterprise data centers, OEMs, and system integrators deploying AI at scale, are strongly adopting the company's products. SanDisk Corp.'s technology has become a key enabler for these deployments, providing the performance characteristics needed to optimize AI infrastructure.

Benefiting from a sharp rise in product prices, SanDisk Corp.'s gross margin surged from less than 30% last quarter to 51.1% this quarter. The CFO projected that non-GAAP gross margin for the third quarter would reach 65% to 67%, with EPS guidance jumping from $6.20 this quarter to a range of $12 to $14.