Why is storage plunging again?

Storage chip stocks experienced sharp volatility this week, as multiple negative signals combined, putting sudden pressure on the gains previously driven by AI demand.

On Wednesday, Micron’s share price plunged 10% in one day, SK Hynix’s US Depositary Receipts (ADR) simultaneously fell 9%, sharply erasing the previous session's gains.The immediate trigger for this sell-off was Buffett's warning that AI-related speculation was rampant and it’s increasingly difficult to find real value in the market, even though he did not name any specific companies.

Meanwhile, GF Hong Kong lowered its Q3 DRAM price growth forecast during its monthly conference call,citing strong resistance from customers to price hikes nearing 30%.

This downturn reflects the core contradiction currently facing the storage sector: fundamentals remain strong, but supply expansion expectations and specification downgrades on the demand side are eroding market confidence in the sustainability of high prices.

Buffett’s Comments Trigger an Emotional Reversal

Micron’s movements this week were a "rollercoaster." On July 13 (Monday), its share price dropped 4.3% to close at $937; on July 14 (Tuesday), KeyBanc raised its target price to $1750, predicting the memory shortage would last until 2027, and the stock rebounded 4.7%, hitting $994.80 intra-day; on July 15 (Wednesday), Buffett’s remarks sharply shifted market sentiment, causing the price to fall to around $865 and its market capitalization to retreat to about $1.05 trillion.

Buffett’s exact words were: when everyone is eager to "gamble" on themes like AI, it becomes "increasingly difficult" to find truly valuable investments.Though not directed at Micron, his comments hit the weak spot of recent trading patterns in chip stocks—investors are reacting to every piece of news as if betting on price movement, rather than making long-term fundamental judgments.

A market observer noted,SK Hynix’s market moves after its Nasdaq listing last week are a microcosm of this "gambling mentality": investors initially bought aggressively after CEO Arvind Krishna said customer spending was shifting toward memory products, then quickly sold due to concerns that SK Hynix’s expansion plans would suppress industry pricing.

DRAM Price Hikes Face Resistance

GF Hong Kong revealed during its monthly call that customers are strongly resisting nearly 30% increases in DRAM prices, leading the institution to slightly lower its Q3 price growth forecast. This contrasts with KeyBanc’s earlier estimate of a 15%-20% DRAM price increase in Q3, suggesting that bargaining power on the demand side is increasingly restricting supply-side pricing expectations.

GF Hong Kong also pointed out that standard server DDR5 specifications are expected to be reduced by about 50% from previous standards; DRAM suppliers are pushing new 96GB and 64GB RDIMM and MRDIMM products, with the latter likely to become the new mainstream specification.

Additionally, according to GF Hong Kong’s July 2 analysis, the LPDDR5X capacity of Nvidia’s VR200 NVL72 rack has been significantly reduced,under extreme scenarios it may drop to a quarter of the original specification, compressing LPDDR5X costs from a possible $1.2 million down to about $293,000. The firm also projects Nvidia’s Vera CPU racks will use a 96GB SOCAMM solution, lowering total memory from the spec sheet’s 1.5TB to 768GB, which may also delay delivery times.

NAND and HBM Become New Flashpoints

While the outlook for DRAM is cautious, GF Hong Kong has turned noticeably optimistic on NAND flash. The firm notes that demand for KV cache offloading continues to exceed expectations, coupled with a new trend of using NAND to replace expensive DRAM, both supporting NAND demand.

KeyBanc analyst John Vinh maintains a positive outlook for the overall memory market,expecting NAND prices to rise 30%-40% in Q3, and another 15% in Q4; HBM prices may more than double next year. HBM is a critical memory component for AI processors, and Micron is one of Nvidia’s HBM suppliers, embedding it deeply in the AI hardware supply chain.

GF Hong Kong is optimistic about SK Hynix’s Q2 performance, projecting revenue will reach 85 trillion won and gross margin will be 63%.

SK Hynix ADR Premium Faces Narrowing Pressure

SK Hynix ADR fell 9% to $176.46 on Wednesday, while its Korean local shares rose 8.8% on the same day, showing a stark divergence. After surging 27% on Tuesday, SK Hynix ADR’s forward P/E reached about 6.2 times, approaching Micron’s valuation—where previously the ADR’s discount to local shares was a key buying reason for investors.

Currently, the SK Hynix ADR premium to local Korean shares has at times exceeded 50%.The Korean Securities Depository is expected to open two-way conversion between local shares and ADRs on July 29, which may significantly narrow the premium gap, posing potential pressure on ADR holders.

Strong Fundamentals Fail to Mask Cyclical Risks

Despite short-term volatility, Micron’s fundamentals are still impressive. Its most recent quarterly revenue reached $41.5 billion, up 346% year-on-year; net profit soared nearly 1400% to $28.2 billion; and adjusted earnings per share stood at $25.11. Micron has signed $22 billion in storage chip supply commitments with 16 strategic customers, including “take-or-pay” clauses, cash deposits, and price floors, providing demand anchors beyond normal market volatility.

Nevertheless, cyclical risks in the storage industry remain unresolved. Micron’s capital expenditure this year is about $27 billion, and SK Hynix and Samsung are also massively expanding production. Once supply catches up to demand, current pricing power will face a stern test. The bullish thesis—that supply tightness will last longer than historical cycles—remains the market’s greatest uncertainty.

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