Micron and SanDisk led the decline; the entire sector plunged. Market focus: Has memory storage peaked?
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Memory chip stocks experienced a large-scale sell-off on Tuesday, as concerns over a cyclical peak overshadowed Samsung's impressive preliminary results.
On Tuesday, after Samsung announced better-than-expected preliminary second-quarter operating profit, its Korea-listed shares closed down 7%.
US memory chip sector stocks came under broad pressure and fell, with the US memory chip index dropping 6.8%. Micron Technology fell 4.7%, SanDisk fell 7.3%, Western Digital fell 7.9%, and Seagate Technology fell 4.7%.
Market sentiment shows that investors’ attention has shifted from the results themselves to a more fundamental question: Has the memory supercycle reached a turning point?
Ted Mortonson, Managing Director at Baird, indicated in an interview that this sell-off reflects Wall Street's concerns about the memory market entering a new stage. Persistent supply-demand imbalance has driven up memory and storage chip prices, and demand elasticity is being suppressed by "large-scale component inflation," with the impact gradually spreading to consumer and enterprise markets.
Wallstreetcn reported that Morgan Stanley’s Asia-Pacific technology team also believes that the memory chip industry is approaching a "rate of change peak": the year-over-year increase in DRAM prices is narrowing, inventory improvements are flattening, and EPS revision breadth has peaked.
In the short term, there is pressure from concentrated positions, increased volatility, and sector rotation, so stock prices may be under pressure temporarily; in the long term, the outlook remains bullish, with projected profit growth of 35-40% by 2027. The key verification point is whether hyperscale cloud vendors can maintain their capital expenditure guidance.
Samsung beats expectations, but market chooses to sell
On Tuesday, Samsung released preliminary results showing second-quarter operating profit of 89.4 trillion won (about $58.5 billion), above the FactSet consensus estimate of 87 trillion won. Preliminary revenue was 171 trillion won, roughly in line with expectations. Compared with the same period last year, operating profit rose about 19 times.
However, this data failed to impress the market. Richard Windsor, founder of research firm Radio Free Mobile, said Samsung's results "only slightly beat expectations," as opposed to Micron’s earlier significant outperformance.
He wrote in a research note on Tuesday:
Therefore, the market is questioning whether we have reached a peak.
Jefferies equity trading analyst Jeffrey Favuzza also noted in a report that most investor feedback continues to point to "cautious sentiment on the AI rally and overly high expectations," while Samsung's preliminary results did not break down by business segment, making it difficult for the market to judge detailed performance; relevant details must wait for the full report later this month.
Demand elasticity under pressure; hyperscale cloud vendors become key factor
Ted Mortonson pointed to hyperscale cloud service providers' (hyperscalers) capital expenditure strategies as the underlying logic for this sell-off.
He stated that when chip price increases erode investment returns and cloud vendors cannot pass costs downstream to customers, the memory cycle may pause until supply and demand return to balance. He added that this balance may only be achieved by 2028 or 2029.
Apple announced in June this year that as memory chip costs continue to rise, it plans to raise iPhone prices, indicating that cost pressures are being transmitted to end markets.
Wallstreetcn reported that Morgan Stanley said AI is not over, but it's now up to hyperscale cloud vendors to lead the next rally.
Morgan Stanley strategist Michael likened semiconductor stock trends to silver, as both experienced parabolic increases and have commodity attributes. The current adjustment may not yet be over, with memory chips bearing the brunt.
He is also optimistic about consumer discretionary, regional banks, transportation, and biotechnology, believing market leadership should shift from beneficiaries of AI capital spending to broader sectors.
Short selling concerns: Will memory stocks follow NVIDIA?
Market's ambivalent attitude toward the memory sector has sparked deeper discussion among analysts.
Citrini Research semiconductor analyst Jukan described current investors’ dilemma in a post on social platform X.
Regardless of whether earnings beat or miss expectations, the market tends to interpret pessimistically. Beating expectations means "this is the peak; profits are unsustainable"; missing expectations means "the memory cycle is over; sell at a high."
Jukan expressed a deeper worry about this:
I worry that memory stocks may end up similar to NVIDIA’s price performance, with company fundamentals hitting record highs but stock prices moving sideways.
He then raised a hotly discussed market question: Will memory stocks ultimately repeat NVIDIA’s path?
Richard Windsor, on the other hand, offered a more concrete assessment framework: The answer depends on whether the demand for AI model processing and tokens can continue to greatly exceed supply. He wrote:
As long as demand continues to far exceed supply, we have no issue; memory companies’ stock prices will continue to rise, and compute providers will keep profiting.
This debate over a “cyclical peak” is expected to intensify as companies like Micron release their complete quarterly reports.
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