Key Highlights

● Micron slid below $900 and Seagate fell to $642.14 during the session.

● Western Digital reported adjusted earnings of $4.64 a share on revenue of $4.38 billion.

● Western Digital guided revenue to $5.0 billion to $5.2 billion and raised its dividend.

● The Philadelphia Semiconductor Index had its biggest one-day drop since June 23.

Memory and storage stocks are closely tied to the AI build-out. On Thursday, October 22, they were among its biggest casualties.

Micron Technology (NASDAQ:MU) slid below $900 during the session, and Seagate Technology (NASDAQ:STX) fell to $642.14. SanDisk (NASDAQ:SNDK) dropped steeply, and Western Digital (NASDAQ:WDC) also slid during regular trading before reporting results after the bell.

The declines came as the Nasdaq Composite tumbled 694 points to 26,008.86, its steepest drop since June 5, and the Philadelphia Semiconductor Index suffered its biggest one-day drop since June 23.

Guilt by association

None of the regular-session declines came with company-specific news. Instead, memory and storage names were caught in a broad selloff across anything tied to AI data center spending.

The trigger was a combination of reports. Meta Platforms (NASDAQ:META) posted negative free cash flow and about $825 billion in spending commitments. Lam Research (NASDAQ:LRCX), the chip equipment maker, gave an outlook that cited supply chain constraints. Nvidia (NASDAQ:NVDA) CEO Jensen Huang said "The demand of the capital is much greater than the availability of the capital."

For investors, the worry was simple. If the biggest buyers of AI hardware face financing pressure, demand for the memory and storage that fills data centers could slow.

Western Digital's after-hours test

Western Digital offered the first real data point after the close, and its results were strong. Adjusted earnings came to $4.64 a share, ahead of estimates of $4.08. Revenue reached $4.38 billion, above forecasts of $4.14 billion.

The company guided second-quarter revenue to $5.0 billion to $5.2 billion, well ahead of the $4.57 billion analysts expected, and earnings of $5.60 to $6.00 a share against estimates of $4.82. It also raised its quarterly dividend to $0.175.

"Fiscal 2027 is off to a strong start, with results exceeding expectations," chief executive Irving Tan said.

The after-hours reaction was choppy. One report said the shares fell after hours despite the beat-and-raise, while other sources showed early gains. Another said an initial pop was erased. Reports differed on the size of the move, and after-hours prices can shift before the next session opens.

Memory and the wider hardware rout

The selling stretched across AI hardware. Lam Research, KLA (NASDAQ:KLAC) and Applied Materials (NASDAQ:AMAT) all fell sharply. AMD (NASDAQ:AMD), Intel (NASDAQ:INTC) and Marvell (NASDAQ:MRVL) dropped steeply. Dell (NYSE:DELL) and Super Micro Computer (NASDAQ:SMCI) gave back Wednesday's gains.

Smaller names were not spared. Penguin Solutions also fell on the sector move, with no company-specific news reported.

The contrast with the rest of the market was stark. About two of every three S&P 500 stocks rose, according to market data, as investors moved into consumer staples, health care and homebuilders.

Strength versus sentiment

The Western Digital report highlighted a tension running through the sector: solid company results set against nervous sentiment about the AI spending cycle.

Lam Research's executives signaled that tight supply is not going away soon. CFO Doug Bettinger said "things are going to continue to be constrained," and CEO Tim Archer said clean-room and component constraints will "limit chip makers and equipment companies' ability to fully meet end demand" into 2027.

Western Digital Guidance Meets Friday's Open

Friday's trading will show how investors digest Western Digital's guidance once the after-hours dust settles. Seagate and Micron will be watched for any follow-through. Next week's results from Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN), due October 28 and 29, will show whether hyperscaler spending plans still support strong demand for memory and storage.