Overview
A broad-based selloff in tech stocks gathered momentum on Thursday as sharp declines in certain high-profile AI-linked names reignited doubts about whether recent returns tied to the AI investment cycle are sustainable. The weakness extended from Asian bourses into U.S. premarket trading, hitting both hardware and software segments.
U.S. premarket dynamics
Memory-focused Sandisk plunged nearly 9% in premarket action even after issuing first-quarter revenue guidance above the Wall Street consensus of $10.47 billion. Western Digital fell even more sharply, sliding over 13% in premarket trading despite providing sales guidance that also exceeded analyst expectations. Peer Micron saw shares retreat about 3.8%.
These moves exemplify a textbook "sell the news" response for instruments that had been driven to extreme momentum valuations. Sandisk had shot up roughly 469% year-to-date heading into Thursday’s open, while Western Digital had rallied around 201% over the same period - making both companies examples of the valuation dispersion that has intensified risk during this earnings season.
Sandisk, which was spun off from Western Digital in 2025, had become a closely watched AI momentum play amid soaring NAND flash demand tied to data-center buildouts.
Software names were also pressured ahead of Thursday’s market open following earnings-driven weakness in sector peer HubSpot. In premarket trade, Salesforce slipped 4.6%, ServiceNow lost 2.7%, Adobe slid 2.6%, and Intuit fell 2%.
Asia leads the selloff
The premarket declines were part of a larger wave of selling that hit Asian markets earlier on Thursday. South Korea's KOSPI closed down 4.6% at 6,296.38, erasing much of the roughly 5% advance it had logged over the prior two sessions. The index traded as low as a 5.5% intraday drop before recovering marginally by the close.
Seoul trading saw Samsung Electronics slide 6.3% and SK Hynix tumble 10.4% - a particularly painful combination for the KOSPI given that those two chipmakers together make up more than half of the index's weighting. The South Korean won strengthened to a 10-month high versus the U.S. dollar during the session.
Asian weakness followed heavy overnight declines in U.S.-listed SpaceX and chipmaker Advanced Micro Devices, reigniting investor concern over whether aggressive AI-directed capital investment can keep delivering outsized returns - a recurring theme of vulnerability during the current earnings season.
Jefferies analysts highlighted that Japan had already seen momentum trades sharply reverse in July 2026, with high-beta stocks down 17.5%, suggesting the AI-related unwind in Asia is part of a broader regional pattern rather than an isolated development in Korea.
Implications for markets
The episode underlines how earnings and guidance can prompt quick reversals for securities that had been driven by momentum tied to AI demand narratives. Even where companies issued above-consensus revenue or sales guidance, steep prior gains left valuations vulnerable to rapid corrections when investor sentiment shifted.
Traders and portfolio managers watching the AI theme will likely weigh these recent moves when considering exposure to high-beta semiconductor and software names in the near term.
Key data points cited
- Sandisk premarket decline: nearly 9% despite above-consensus revenue outlook of $10.47 billion for Q1.
- Western Digital premarket decline: more than 13% despite above-consensus sales guidance.
- Micron share pullback: 3.8%.
- KOSPI close: down 4.6% at 6,296.38; intraday drop up to 5.5%.
- Samsung Electronics decline: 6.3%; SK Hynix decline: 10.4%.