The US stock market's memory sector saw its pre-market losses widen, with Western Digital (NASD: WDC) falling over 8%.
Major US equity index futures were mixed on July 16th, with Nasdaq 100 futures down 0.93%, Dow futures up 0.14%, and S&P 500 futures declining 0.29%.
The pre-market decline in the memory chip sector intensified. Western Digital led the losses, dropping more than 8%. Other notable decliners included SanDisk and SK Hynix, both down over 7%, with Micron Technology (NASD: MU), Seagate Technology PLC (NASD: STX), and Marvell Technology (NASD: MRVL) also falling.
This movement followed a significant sell-off in the Asian memory chip market earlier in the day. South Korea's two major memory chip giants saw sharp declines, with SK Hynix plummeting more than 11% and Samsung Electronics dropping over 8%.
The sell-off is linked to new regulatory measures announced by South Korea's Financial Services Commission targeting single-stock leveraged ETFs. The changes include raising the minimum margin requirement from 10 million won to 30 million won, accepting only cash as collateral, limiting purchases to 20 shares per transaction for single-stock leveraged trades, and banning the listing of new single-stock leveraged products.
Analysts suggest the broad-based decline in memory stocks is a direct reaction to South Korea's tightening of rules on leveraged trading. The new regulations, by raising margin requirements and halting new product launches, specifically target a source of speculative funding active in memory stock trading. As a key component of AI infrastructure, the memory sector had seen substantial gains this year driven by strong earnings from companies like Micron and AI demand expectations, making it highly sensitive to shifts in market sentiment and liquidity.
Despite the current pressure, KeyBanc analyst John Vinh maintains a positive outlook for the overall memory market. He forecasts a 30% to 40% price increase for NAND flash memory in the third quarter, followed by a further 15% rise in the fourth quarter, and expects HBM prices to potentially double by 2027.
Separate research from analyst Shuli Ren indicates that the global memory chip shortage is projected to peak in the second quarter of 2026, begin to stabilize in the first quarter of 2027, and could potentially lead to an oversupply by 2028 at the earliest.
In other news, shares of Taiwan Semiconductor Manufacturing Company fell more than 5% in pre-market trading following its earnings report.
The company reported its second-quarter 2026 results on July 17th, local time. TSMC posted revenue of NT$1.27 trillion, a 36% year-over-year increase that exceeded analyst estimates of NT$1.264 trillion. Net profit reached NT$706.6 billion, surging 77.4% and beating market expectations of NT$623.7 billion. Its gross margin was 67.7%, also above forecasts.
Ricky Ho, a fund manager at Singapore-based Four Capital, commented that market expectations for TSMC are already at "exceptionally high levels." He noted that any further stock price appreciation would increasingly depend on the company's ability to consistently deliver results that surpass market expectations.
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