What Happened?

A number of stocks fell in the afternoon session after investors took profits following the chip sector's strong rally in the first half of the year as Middle East tensions escalated. 

SK Hynix shares fell over 5% in South Korea following its strong Nasdaq debut the previous week. 

The selloff dragged down memory peers like Micron Technology and SanDisk Adding to the weakness for memory stocks, a South Korean brokerage lowered its second-quarter earnings forecast for SK Hynix. Brokerage firm KIS projected SK Hynix's second-quarter operating profit at 60.4 trillion won, roughly 8% below the 65 trillion won market consensus. The expected miss stems from the company's heavy reliance on long-term contracts for its premium High Bandwidth Memory (HBM) chips, a structure that effectively locked the manufacturer out of recent 30% to 50% price surges in the broader spot market. It is natural to assume that selling more premium AI chips would immediately expand profit margins. 

However, HBM economics work differently than standard memory. Because these advanced chips require massive upfront capital, they are typically sold through multi-year agreements that fix the price. Standard DRAM and NAND chips, by contrast, trade on the spot market where prices move freely. Consequently, SK Hynix's heavy exposure to premium, fixed-price contracts placed a near-term ceiling on its pricing power even as broader market prices spiked. This revelation triggered a reassessment across a memory sector priced for perfection, accelerating profit-taking among investors who were already questioning the durability of AI capital spending. 

Adding to the defensive positioning, renewed tensions in the Middle East, including reports of US military action against Iran, pushed oil higher and encouraged a shift toward safer assets.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Memory Semiconductors company Seagate (NASDAQ: STX) fell 6.3%. Is now the time to buy Seagate? Access our full analysis report here, it’s free.
• Memory Semiconductors company Western Digital (NASDAQ: WDC) fell 6.6%. Is now the time to buy Western Digital? Access our full analysis report here, it’s free.

Zooming In On Western Digital (WDC)

Western Digital’s shares are extremely volatile and have had 56 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 4 days ago when the stock gained 7.1% on the news that semiconductor stocks rebounded amid dip buying following a recent selloff, as reports revealed that China may ease restrictions on advanced Nvidia AI chip imports. 

Following sessions of profit-taking that dragged down the entire sector, semiconductor stocks rebounded strongly. The reversal was triggered by a report from The Information that Chinese authorities recently informed top technology companies, including Alibaba, ByteDance, and DeepSeek, that they may soon receive permission to purchase a limited quantity (capped under 200,000 units) of Nvidia's H200 AI processors for model training. 

Supporting the improved outlook for chip stocks, reports revealed that SK Hynix's $24.5 billion U.S. ADR offering was oversubscribed by more than seven times, proving that institutional appetite for AI memory chips remains highly robust.

Western Digital is up 188% since the beginning of the year, and at $540.73 per share, it is trading close to its 52-week high of $594.11 from June 2026. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $7,716.

ONE MORE THING: The $21 AI Application Stock Wall Street Forgot. While Wall Street obsesses over who’s building AI, one company is already using it to print money. And nobody’s paying attention.

AI chip stocks trade at ridiculous valuations. This company processes a trillion consumer signals monthly using AI and trades at a third of the price. The gap won’t last. The institutions will figure it out. You need to see this first. Read the FREE Report Before They Notice.