Memory chip stocks had a punishing week. Yet the shortage that powered their rally has not gone away. That disconnect is what MS Hwang, research director at Counterpoint Research, sees in the sell-off.
"While most of these negative indicators miss the point or exaggerate, it is still too early to conclude that AI growth is slowing down," Hwang told MarketDash on Friday.
So far, the damage has been steep:
- SK Hynix Inc. (NASDAQ: SKHY) fell 24.3% in Seoul this week, even after a 0.8% gain on Friday. The stock now trades about 57% below its record high.
- Suwon, South Korea-based Samsung Electronics Co. Ltd. (OTC: SSNLF) lost 17.7% over the week. South Korea's benchmark KOSPI index dropped 14.5%, despite a 2% rebound on Friday.
- Boise, Idaho-based Micron Technology Inc. (NASDAQ: MU) closed Thursday at $931.24. That is down 9.5% over five sessions and about 26% below its record of $1,255. Sandisk Corp. (NASDAQ: SNDK) fell 11.8%.
- The Roundhill Memory ETF (CBOE: DRAM) is down 14% for the week, heading for its worst weekly performance since late June.
China Is Not The Real Trigger
The sell-off began after China's ChangXin Memory Technologies, or CXMT, reported progress on a denser chip design for server memory, the market's most profitable segment.
Hwang does not think Chinese capacity explains the drop.
"Memory supply is unlikely to have a major impact before 2028," he said.
China's progress may surprise investors who doubted it, he added, but "it wouldn't trigger a sell-off."
Instead, he pointed to the financial side: inflation, interest rates and funding costs, which could slow the flow of capital into AI.
Rumors added pressure.
These included talk of companies delaying back-end investment and of less high-bandwidth memory, or HBM, per AI system. HBM is the stacked memory that sits next to AI processors.
Broadcom's Comment Changed The Mood
If one data point explains the sell-off, Hwang said, it is likely Broadcom Inc.'s (NASDAQ: AVGO) recent remarks.
At a panel in Singapore on Monday, CEO Hock Tan said capital, not wafers or memory, would be the company's biggest constraint as AI development continues.
According to Hwang, that message may have created the impression that it is braking AI spending.
Still, he said this does not look like a traditional memory-cycle sell-off.
Suppliers' cash flows remain exceptionally strong, and big technology companies have clean balance sheets.
If they return that cash to shareholders, the stocks look like attractive assets, he said.
Korea Pays The Price Of Uncertainty
History shows that export-sensitive emerging markets such as South Korea tend to suffer the heaviest selling when uncertainty rises, Hwang said.
"Korean suppliers are not debt-heavy anymore, but trading patterns may remain," he said.
He compared China's rise with the shift of memory leadership from Japan to South Korea decades ago. Latecomers often grow during downturns, backed by structures that do not depend on profitability.
Today's leaders, however, are far stronger financially.
In addition, customers now develop chips with them from design through manufacturing.
Given geopolitical tensions, that puts Chinese suppliers at a disadvantage. Export rules and patent risks could also limit their reach outside China.
Prices Tell A Similar Story
Hwang said Chinese memory already sells at or above global prices because supply is so scarce. In a glut, the opposite would happen. That is why HBM matters.
Hwang said it is "far more difficult than manufacturing a single component," comparing it to building a car that runs well from many separate parts.
