Memory Stocks Driving Market Gains Amid Caution
LONDON — Memory stocks have seen impressive returns, greatly boosting both the U.S. and South Korean stock markets in recent years. However, analysts caution that investors might be overlooking the cyclical nature of markets, which could lead to pitfalls.
The memory sector has been on a growth spree, particularly since the launch of ChatGPT in December 2022. This has created a soaring demand for high-bandwidth memory (HBM).
Samsung and SK Hynix, among the largest HBM chip producers, have seen their stock prices surge—114% and 186% respectively—just since the beginning of the year. Notably, U.S. firms like Micron and SanDisk have also experienced significant gains since 2026, with progresses of 141% and 156% respectively.
The prevailing belief driving this bull market is that the memory industry might have moved past its historical cycles of fluctuation, where storage demand saw wide variations while supply remained relatively static.
Industry leaders argue that AI technology could change the game, potentially leading to ongoing supply shortages that keep prices elevated for years to come.
Industry Outlook
William de Geal, a portfolio manager at Blue Box Asset Management, remarked that the memory industry is known for its significant ups and downs. He expressed concern about whether the industry might indeed be in a long-term value-creating phase, especially when past cycles often ended badly.
New Innovations
In response to supply challenges, Google recently unveiled TurboQuant, a new compression method intended to reduce the memory needed for large language models by six times. This innovation aims to enhance AI model efficiency, which is crucial for leading research organizations.
This kind of advancement could decrease the demand for AI memory chips, essential for training large language models at companies like Google and OpenAI. Deutsche Bank suggested that investors should prepare for lingering disruptions tied to AI, as TurboQuant’s announcement resulted in a notable dip in stock prices for major memory providers.
However, there’s still uncertainty about whether such technology could result in a lasting shift in demand. John Cunliffe from JM Fin mentioned that production could significantly increase over the next few years, which may alleviate current supply constraints, particularly if AI demand normalizes.
“Right now, stock prices seem to be based on the expectation that high prices will persist for the long term,” he noted, adding that the sector has recently experienced congestion, leaving it vulnerable to a shakeout.
Andrew Lapping, chief investment officer at Ranmore Fund Management, found it nearly impossible to predict when supply might surpass demand. He urged caution among investors in an industry where long-term average returns are low but current pricing suggests high expectations for future profits. As he put it, “Leopards don’t change their spots very often,” indicating skepticism about substantial changes in the memory market.
Risks in Korea
Samsung and SK Hynix are key players in propelling South Korea’s stock market to unprecedented heights by 2025-2026, with these companies collectively representing over 50% of the total index.
Steve Bryce, global chief investment officer at Standard Chartered, voiced that the peak optimism for Korean stocks may soon be reached. He recently advised clients in South Korea to lock in some profits and consider diversifying their portfolios globally.
Nonetheless, some financial institutions remain optimistic about the future of these firms. For instance, Nomura forecasted that SK Hynix’s stock could hit 4 million won and Samsung Electronics could reach 590,000 won within the next year, indicating a 20% rise for Samsung and a doubling of SK Hynix’s stock price based on current values.
