- Top memory stocks like SK Hynix, Kioxia, and Micron are in a freefall.
- The retreat is happening amid profit-taking among investors.
- There are concerns about Apple’s decision to seek for permission to buy Chinese memory.
Top memory stocks are extending their sharp decline today, wiping billions of dollars off their market value. Micron Technology shares fell to $1,032, down more than 17% from their year-to-date high, while SK Hynix and Kioxia each dropped more than 6%. The latter two are now down over 20% from their respective highs this year. Meanwhile, the DRAM ETF has declined by 18% from its year-to-date peak.
Why SK Hynix, Kioxia, and Micron Stocks are Falling
There are three main reasons why these memory giants are plunging. First, a Bloomberg report suggests that Apple is putting pressure on US regulators to allow it to buy Chinese memory chips.
Apple argues that such a move will help it to avoid raising prices for key products like MacBooks and the iPhone. If this happens, it may buy these products from companies like Yangtze Memory and GigaDevice Semiconductor.
It will also lead to more companies, including hyperscalers like Meta Platforms, Microsoft, and Amazon to diversify their sourcing. Such a move will likely lead to lower memory prices, which will affect margins of top companies like SK Hynix, Micron, and Kioxia.
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The stocks are also plunging after a group of companies launched a lawsuit in California. This group, which is made up of top PC makers, argue that their actions have led to inflated memory prices. It is still too early to determine whether the group will prevail.
Profit Taking After a Strong Rally
At the same time, the sell-off is mostly because of profit-taking since these memory names are some of the best performers this year. SK Hynix stock has jumped by 753% in the last 12 months, while Kioxia has dropped by 606%. Micron stock has soared by 743% in this period, with its market cap rising to over $1 trillion.
This rally accelerated recently when it said that its revenue jumped by 74% in the third quarter to $41 billion. It now expects that its fourth quarter revenue will jump to $80 billion, while its gross margins will cross the 86% mark.
The ongoing Micron, SK Hynix, and Kioxia retreat does not mean that it is the start of a bear market. Indeed, analysts are still bullish on these companies. In a note on Thursday, Keybacc noted that contract prices for several DRAM configurations rose by 3% in June, while NAND rose by 2.4%. The report said:
“While the industry is building out capacity in response to AI-driven DRAM/HBM demand, meaningful capacity is not expected until 2027, which still will not be meaningful enough to close the gap.”
What is clear, however, is that the sector will see elevated volatility in the coming months as some investors book profits and other move to buy the dip.
A strong bearish breakout in the memory chip industry may also be beneficial to some sectors that have fallen out of favor with investors. Indeed, top stocks like Microsoft and Meta Platforms jumped on Wednesday. Also, Bitcoin and other altcoins were also in the green on Thursday morning.
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