Two of the biggest beneficiaries of the AI storage boom, Sandisk and Western Digital, saw their shares drop roughly 10% in pre-market trading on Thursday despite reporting strong quarterly earnings. The sell-off, driven by forward guidance that failed to match elevated expectations, may carry implications that extend well beyond the semiconductor sector and into the cryptocurrency market.
Strong Results, Disappointing Outlook
Sandisk posted record fourth-quarter revenue of $8.97 billion with non-GAAP earnings per share of $39.25, comfortably beating analyst estimates. Western Digital delivered a similarly impressive performance, reporting revenue of $3.75 billion, up 44% year over year, with gross margins surging to 54.4%. Yet both stocks are now trading roughly 50% below their all-time highs.
The problem was not the results but the guidance. Sandisk's first-quarter revenue projection of $10.7 billion fell short of the $11.2 billion analysts had expected, and its EPS guidance also missed. Western Digital's outlook was solid, but after a 500% rally, investors were looking for another blowout beat. Sandisk also announced an additional $14 billion share buyback program, bringing total authorization to $15.5 billion, but even that failed to reassure the market.
The AI Trade May Be Cooling
Over the past 12 months, Sandisk and Western Digital have gained more than 3,000% and 550%, respectively, propelled by the artificial intelligence boom. That explosive run left assets like cryptocurrencies and precious metals in the rearview mirror. But with AI momentum showing signs of fatigue, a capital rotation may be taking shape.
Gold has risen more than 7% over the past several days, while Bitcoin has held above $64,000 and barely reacted to the recent Coldcard hardware wallet exploit. For context on Bitcoin's recent resilience, see our coverage of the S&P 500 adding crypto's $2 trillion market cap while Bitcoin lagged. Crypto traders may view these indicators as an early signal that momentum is shifting, especially given the prevalent narrative that investors have been rotating capital into AI at Bitcoin's expense.
What a Rotation Could Mean for Crypto
The AI trade has been widely blamed for siphoning capital away from the cryptocurrency sector. If that trade is beginning to stall, the reversal could create room for a crypto resurgence. Bitcoin's ability to hold above $64,000 despite negative catalysts, including a major hardware wallet exploit and broader market weakness, suggests underlying demand remains intact even as speculative fervor has cooled.
When capital that has been concentrated in a single thematic trade begins to seek alternative destinations, assets that have been neglected can experience sharp re-rating. Bitcoin and the broader crypto market, which have lagged the AI-driven equity rally for months, could be primary beneficiaries if the rotation accelerates. For a related perspective on how macro shifts could affect Bitcoin's trajectory, see our analysis of why the AI bubble may need to burst before Bitcoin can reach new highs.
Guidance as a Leading Indicator
The Sandisk and Western Digital sell-off also highlights a broader pattern in markets: when stocks that have run 3,000% in a year disappoint on forward guidance rather than results, it signals that expectations have outpaced reality. That gap between expectation and delivery is often where major market inflection points originate.
If AI-adjacent equities continue to underperform relative to the towering expectations built into their valuations, the capital that has been flowing into that sector will need somewhere to go. Whether Bitcoin and digital assets become the primary beneficiaries remains to be seen, but the combination of gold's rally, Bitcoin's stability, and AI stock weakness is creating a setup that crypto investors have been waiting for.
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