After the sharp decline in storage, pay attention to the "three major catalysts" that are expected to reverse market sentiment.

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Memory stocks experienced a wave of concentrated sell-offs in March, with seemingly legitimate reasons—the sustainability of cloud vendors’ hardware expenditures, whether AI memory demand is overestimated, whether Google’s TurboQuant compression technology will crush HBM demand… All these concerns erupted at once, compounded by geopolitical tensions in the Strait of Hormuz, leading to a rapid deterioration in market sentiment toward memory stocks.

According to Chasewind Trading Desk, Jay Kwon, JPMorgan's Asia-Pacific semiconductor analyst, characterized this downturn as a "divergence between sentiment and fundamentals" in his latest report. His view: the memory industry is shifting from a stage of "rapid infrastructure expansion" to one of "optimization and profitability refinement." There is a lack of short-term catalysts and the risk-reward ratio doesn't look good, but mid- to long-term valuations are already quite attractive—current memory stocks are trading at only 1.1x the expected FY27 price/book ratio, and 2-6x price/earnings. He maintains "overweight" ratings on Samsung, SK Hynix, and Kioxia, and recommends buying on dips.

The report believes that while TurboQuant poses a real threat, it's not as fatal as many imagine; it’s more likely to "optimize system-level efficiency" rather than actually "reduce memory consumption." On the other hand, foreign ownership of Samsung is down to 48.6%, a near ten-year low, and SK Hynix is also at a historically low 53.1%. However, retail investors aggressively increased positions in the first quarter of 2026, net buying about KRW 47 trillion in Korean memory stocks.

Whether market sentiment can reverse in the next 1 to 3 months hinges on three core questions: Can cloud vendors’ AI-related revenue and CapEx continue to exceed expectations? Will HBM specifications be upwardly revised (directly affecting profit visibility for 2027)? And will the disclosure of long-term agreements (LTA) by memory makers provide enough profit floor protection?

TurboQuant: The threat is real, but likely not as deadly as feared

The release of Google’s TurboQuant technology was a key trigger for memory stock declines in March. This technology can compress KV caches (Key-Value Cache) in AI systems by 4 to 6 times with minimal loss of accuracy, sparking worries about declining hardware demand.

JPMorgan takes a cautious, rather than pessimistic, view and counters with three points:

1. Compressing KV caches may reduce the need to offload to different memory tiers, which boosts overall system efficiency;
2. Developers will likely use the freed-up memory to expand to longer context windows, thereby maintaining demand for HBM and system memory;
3. According to Jevons Paradox, reduced costs will drive wider adoption of AI, ultimately increasing overall compute and memory demand.

Meanwhile, TurboQuant has some limitations: both it and NVIDIA’s KVCT demos are based on models from 18 to 24 months ago with only 1.5 to 70 billion parameters. It's still uncertain whether it can be extended to modern clusters with tens or hundreds of billions, or trillions, of parameters. Also, reading, writing, and processing compressed data requires additional GPU resources.

Thus, the impact on the memory industry is more likely to be "system-level efficiency optimization" rather than "reduced memory consumption"—not unlike the market’s initial overreaction to DeepSeek.

Investor Sentiment and Fund Flows: Foreign Investors Retreat, Retail Steps In

Fund flow data reveals a structural split in the market right now.

Foreign capital nets out: In Q1 2026, foreign investors sold a net total of about KRW 64 trillion in Korean memory stocks (about KRW 44 trillion Samsung, KRW 20 trillion SK Hynix), sharply contrasting with the KRW 7 trillion net bought throughout 2025. Foreign ownership of Samsung Electronics dropped to 48.6%, a low since late 2015 (down from the November 2025 peak of 52.6% and well below 2019's over 58%). SK Hynix’s foreign ownership is at 53.1%, only slightly up from its February 2026 low of 52.6%, but still in a general downtrend (peak of 56.3% in September 2025).

Retail buying aggressively: In contrast, retail investors aggressively increased their positions in Q1 2026, net buying around KRW 47 trillion (Samsung about KRW 32 trillion, SK Hynix about KRW 15 trillion)—a complete reversal from Q4 2025 when they net sold KRW 10 trillion.

Institutions basically stable: Domestic institutions maintained stable holdings throughout 2025, but became significant net buyers in Q1 2026, totaling about KRW 6 trillion (Samsung about KRW 1 trillion, SK Hynix about KRW 5 trillion).

Hedge funds mainly focused on deleveraging in early to mid-March, but recently short interest has obviously increased—daily average short volumes for Samsung and SK Hynix in the latter half of March rose 2.2x and 1.3x, respectively, compared to the first two weeks.

Three Catalysts: Emotional Turning Points Over the Next 1–3 Months

JPMorgan points out three possible catalysts to reverse the current negative narrative during the April–May earnings season:

Catalyst 1: Whether AI revenue growth at cloud vendors can support hardware CapEx expectations. The contradiction is this: cloud hardware CapEx growth is expected to slow from 65% in 2026 to 15% in 2027, while overall memory market size growth is expected to drop from 226% to 33%. If AI-related revenues and orders beat expectations, then "cliff-like" slowdown fears could be partly relieved.

Catalyst 2: Upgrades to HBM specifications. Whether server HBM adoption in 2027 is revised upward, and the shipment pace of ASIC chips, will directly determine the depth of the memory sector’s supply-demand gap in 2027. The market is concerned about a peak in average selling prices, but there are already contrary signals in the supply chain—GPU server demand is possibly being revised up, and ASIC pipelines are expanding. As for rumored cuts in NVIDIA Rubin Ultra GPU scale, the report deems the impact on HBM demand negligible.

Catalyst 3: Substantive disclosures of LTA long-term contracts. Micron has already announced the first strategic customer long-term agreement, and investors are waiting for Samsung and SK Hynix to follow. What investors really want is not just the contract, but the actual cycle-bottom profit protection clauses—price floors, volume guarantees, prepayment provisions, penalty mechanisms. If these clauses are robust, the industry's valuation system could be systematically rerated.

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The above content is from Chasewind Trading Desk.

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