Don't Be Greedy

Not financial advice. Please read the disclosure below.

So yesterday, I posted that I doubled my money on $MU ( ▼ 8.02% ) . After posting it, I sold it and used the proceeds to buy more income ETFs. While that’s happening, Korean investors are amping up their leveraged bets on memory makers SK Hynix and Samsung, with others liquidating their savings and insurance policies to buy more shares of these memory makers.

While some, like notable journalist Tae Kim, think that memory stocks like $MU ( ▼ 8.02% ) are still cheap, I think that the rally has gone too far. Seeing the behaviors that people have for Samsung and SK Hynix’s shares is a classic example of euphoria. To add fuel to the fire, even the Samsung and SK Hynix employees are packing the supercar showrooms throughout Korea.

For Samsung employees, since each employee’s bonus for this year looks to be around $400K, with that money, and the extra money they have from the stock market gains, they’re definitely flooding the supercar dealerships or buying more luxury goods, traveling the world, or even buying property.

When these stocks are already elevated at extreme levels, it’s usually best to avoid these stocks in general. The risks of getting caught buying at the peak and riding the wave down are higher than the chances of it continuing to grow. It’s the reason why I choose to accumulate more ETFs with exposure to the crypto space, like $BLOX ( ▲ 1.2% ) , and software companies like $MSFT ( ▲ 2.78% ) , instead of doubling down on something like $MU ( ▼ 8.02% )  $DRAM ( ▼ 6.26% )  $SNDK ( ▼ 8.13% ) or $EWY ( ▼ 3.02% ) .

While economic theory has people thinking that these memory workers will simply invest more to expand production of memory chips, the reality is these memory chip makers want to prolong the memory chip shortage and enjoy the pricing power they currently have for as long as they can.

Hyperscalers, desperate for memory chips, were even willing to give money to help fund the construction of the fabs and fund the purchase of $ASML ( ▲ 2.23% ) lithography machines. But the memory chip makers aren’t accepting their offers, no matter how lucrative they are.

Eventually, hyperscalers and other firms will find solutions to the memory chip shortage crisis by simply making the AI buildout less memory-intensive. Nvidia $NVDA ( ▲ 0.33% )  acquired the core IP of chipmaking startup Groq in hopes that its SRAM-first approach allows its GPUs to be less reliant on High Bandwidth Memory, which is the memory chips that Micron, SK Hynix, and Samsung produce. Cerebras $CBRS ( ▼ 9.72% ) is doing something similar with SRAM, but unlike Nvidia, Cerebras is less focused on memory intensity and more focused on how to source context from memory faster.

To those who keep citing Jevons Paradox, all I have to say is that since the memory chip makers are less willing to quell memory chip prices on their end, the hyperscalers, frontier labs, and all others in the tech world are now more focused on finding ways to be more efficient with memory so they can demand fewer memory chips while still making progress on the AI buildout. Thus, this hurts the memory chip makers more than it does the hyperscalers.

I do not see Chinese memory makers CXMT and YMTC flooding the global markets with NAND and DRAM soon, since already, their domestic demand for memory chips is high enough that they don’t have chips to send to the rest of the world. It will take years before they start disrupting the oligopoly that SK Hynix, Samsung, and Micron have enjoyed for a long time.

To conclude this post, here are some wise words I have to say to memory investors:

Disclosure

About Me

I am an independent personal finance writer and blogger. I do not have any formal training or certifications in finance, but I have a deep passion for the subject and have been researching and writing about personal finance topics for several years.

Disclaimer

The information provided in my articles is for educational and informational purposes only. It is not intended to be a substitute for professional financial, investment, or tax advice.

I encourage you to do your own research, consult with a licensed financial advisor, and make decisions that are best suited to your individual financial situation and goals. I cannot guarantee any specific outcomes or results from following the advice in my articles.

Please remember that investing involves risk, and you should only invest what you can afford to lose. Past performance is not a guarantee of future results.

If you have any questions or concerns, please don't hesitate to reach out to me. I'm here to help!

I/We own NVDA.