---
title: "Why I Short SanDisk (Part 1): The Unchangeable Cyclicality of SanDisk's Business"
description: "$Sandisk(SNDK.US) $Micron Tech(MU.US) have obvious cyclicality and belong to cyclical stocks. 1. What are "cyclical stocks"? The definition of cyclical stocks is not "fluctuating stock pri"
type: "topic"
locale: "en"
url: "https://longbridge.com/en/topics/38742400.md"
published_at: "2026-02-14T15:01:34.000Z"
author: "[欧阳大叔](https://longbridge.com/en/profiles/12946194)"
---

# Why I Short SanDisk (Part 1): The Unchangeable Cyclicality of SanDisk's Business

$Sandisk(SNDK.US) $Micron Tech(MU.US) have obvious cyclicality in their businesses and are considered cyclical stocks.

1\. What is a "Cyclical Stock"?  
The definition of a cyclical stock is not "stock price volatility," but rather:  
Company profits are highly dependent on the macroeconomic cycle or industry supply-demand cycles.  
Its characteristics are:  
High revenue volatility  
Significant fluctuations in gross margin  
Profits can swing from huge losses → massive profits → back to losses  
Stock price leads the reversal in fundamentals  
Typical industries:  
Semiconductors  
Steel  
Shipping  
Chemicals  
Commodities  
2\. Why is SanDisk a cyclical stock?  
The SanDisk referred to here is the memory business entity (NAND Flash business).  
SanDisk's core business:  
NAND Flash  
SSD  
Memory chips  
And NAND is a typical strongly cyclical product.  
3\. What is the nature of the NAND cycle?  
The memory industry is a "supply-driven cycle."  
The cycle is determined by three things:  
Capacity expansion pace  
End-market demand  
Inventory cycle  
① Supply Side: Capacity expansion has a lag  
Memory fab expansion:  
Huge investment (billions of USD)  
Construction cycle of 1-2 years  
Capacity cannot be adjusted quickly  
When prices rise:  
All manufacturers expand capacity  
Future capacity is released in a concentrated manner  
Oversupply  
Prices crash.  
② Demand Side: Strong volatility  
NAND demand comes from:  
PCs  
Smartphones  
Servers  
Data centers  
When the economy slows down:  
Companies reduce IT spending  
Consumer electronics sales decline  
Demand suddenly contracts.  
③ Inventory Cycle  
Memory chips have a clear inventory chain:  
Wafer fab → Module makers → OEMs → End-users  
Once end-user sales drop:  
OEMs stop placing orders  
Module makers destock  
Chipmaker orders plummet  
This causes:  
Revenue crash + price stampede  
4\. How does the cycle manifest in financial reports?  
At the peak of the cycle:  
ASP (Average Selling Price) rises  
Gross margin 40%+  
Explosive growth in net profit  
At the bottom of the cycle:  
ASP crashes  
Gross margin turns negative  
Massive losses  
This is why:  
Memory companies can go from "huge losses" to "massive profits" a year later.  
5\. How long is the cycle?  
Typical memory industry cycle:  
2–4 years per round  
Recent rounds:  
2017–2018 High prosperity  
2019 Downturn  
2021 Another peak  
2022–2023 Deep downturn  
2024–2025 Recovery  
This kind of rhythm is structurally repetitive.  
6\. Why is it not a "Growth Stock"?  
Compare it with NVIDIA:  
NVIDIA:  
Has technological barriers  
Has pricing power  
Long-term upward trend in gross margin  
Structural growth (AI demand explosion)  
Whereas SanDisk:  
Products are standardized  
Prices fluctuate with supply and demand  
No long-term stable pricing power  
Profits swing with the cycle  
This is the core difference between "Growth Stock vs. Cyclical Stock."  
7\. How to understand the word "Cycle"?  
Cycle = Supply-demand mismatch + Investment lag + Price volatility  
It's not emotional volatility.  
It is:  
Capital expenditure — Capacity release — Price collapse — Production cuts — Price recovery  
A mechanical economic loop.  
8\. The correct way to invest in cyclical stocks  
Cyclical stocks cannot use the "long-term hold growth logic."  
Instead:  
Position during industry loss periods  
Add positions during the initial phase of price reversal  
Reduce positions during profit explosion periods  
The core is:  
Buy during losses, sell during high profits  
Because:  
Stock prices always lead profits by 6–9 months.  
9\. Summary  
SanDisk's issue is not "company problems," but rather "the industry is inherently cyclical in structure."  
Its volatility is not a management problem, but determined by the industry's nature.

### Related Stocks

- [SNDK.US - Sandisk](https://longbridge.com/en/quote/SNDK.US.md)
- [MU.US - Micron Tech](https://longbridge.com/en/quote/MU.US.md)
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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.