Major memory manufacturers including Kioxia, Samsung, SK Hynix, and Micron have all posted record-breaking quarterly results, signaling that the memory chip supercycle remains firmly on a high-growth trajectory.
Samsung Electronics and Micron Technology exceeded market expectations, while Kioxia and SK Hynix fell short on some key metrics despite strong overall performances. However, the explosive profit growth across the board was driven almost entirely by price increases rather than a meaningful expansion in shipment volumes.
Market sentiment toward the sector's future growth momentum is turning increasingly cautious, leading to sharp stock price declines following the earnings releases. This phenomenon, often described as "buy the rumor, sell the news," has brought the memory supercycle to a critical inflection point. The key questions now are: where is the market heading? When will the cycle turn? And what exactly is fueling investor anxiety?
Memory Companies Became "Cash Printers" with Tenfold Profit Growth
In the most recent quarter, memory giants delivered results that can only be described as extraordinary. On July 31, Kioxia reported its fiscal 2026 first-quarter (April-June) results with revenue of 1.77 trillion yen, a staggering 415.5% year-on-year increase, and net profit of 842.2 billion yen, surging more than 45 times. The core driver of this explosive performance was the robust demand for NAND flash from AI data centers, which pushed the average selling price (ASP) up by approximately 70% quarter-on-quarter. Revenue from server and enterprise-grade SSDs and storage solutions surged over 440% year-on-year.
Samsung Electronics posted second-quarter revenue of 171.5 trillion won, up 130% from the previous year, and operating profit of 89.5 trillion won, a massive 1,814% increase. Its semiconductor division (DS) contributed 99% of the company's total profit, surpassing market expectations. SK Hynix also reported its strongest-ever financial results, with operating profit growing more than five times to 60.5 trillion won, revenue up 257% to 79.3 trillion won, and net profit of 93.9 trillion won, an increase of 1,242%. Despite these impressive figures, both revenue and profit fell short of market forecasts.
A month prior, Micron Technology delivered third-quarter results that also exceeded market expectations. Revenue reached $41.46 billion, up 73.8% quarter-on-quarter and 345.7% year-on-year, significantly beating the consensus estimate of $35.84 billion. GAAP net profit was $28.24 billion, with diluted earnings per share of $24.67, a year-on-year surge of 1,398.3%.
The primary driver of memory chip revenue and profit growth is the global AI infrastructure buildout. Cloud giants like Microsoft, Google, Amazon, and Meta are investing heavily in data centers, with combined capital expenditure expectations for fiscal 2026 exceeding $800 billion. These funds are pouring into GPU purchases, which are inseparable from HBM (High Bandwidth Memory). HBM, in turn, competes for capacity with standard DRAM, causing a shortage and price spikes across virtually all memory chips, from servers to consumer electronics. This has rapidly inflated the profits of memory chip manufacturers.
Despite these record profits, stock prices have experienced significant pullbacks, failing to follow the earnings trajectory. Even as companies issue optimistic forward guidance, the capital markets are voting with their feet, displaying clear skepticism.
What is the Market Worried About?
Memory chip stocks experienced significant volatility in July. SK Hynix shares saw a maximum drawdown of 54% from their peak, Samsung Electronics 42%, and Micron Technology 33%. Even record-breaking earnings failed to prevent these sharp declines. This suggests the issue is not just about financial results, but reflects a deeper market concern: "How long can the good times last for memory?"
While memory contract prices continue to rise, the pace of increase is slowing. According to a report from TrendForce, DRAM and NAND Flash contract prices for the third quarter of 2026 are expected to rise by 13-18% and 10-15% quarter-on-quarter, respectively. This represents a significant slowdown compared to previous quarters, primarily due to downward revisions in consumer demand and the fact that price bases are at historically high levels, pushing buyer tolerance to the limit. However, AI server and data center construction remain core pillars of demand.
TrendForce analyst Xu Jiasheng told the media that the supply-demand imbalance for DRAM is expected to persist until 2027, with the price uptrend likely continuing until the second half of that year. However, after several quarters of sharp increases, further price hikes will need to consider the affordability of end customers. Therefore, starting from the third quarter, the quarter-on-quarter growth rate is expected to slow down markedly.
One industry insider noted, "Recently, memory chip manufacturers have been lowering prices for eMMC (embedded MultiMediaCard), signaling a bit of price competition. DRAM prices are holding up better, but FLASH prices are also starting to get competitive." The source attributed this to two main factors: heavy inventory buildup by customers, meaning supply is not tight, and the fact that all major memory manufacturers have ample stock. There were also reports that OPPO formally rejected Samsung Electronics' proposed memory chip pricing for the third quarter of 2026, though OPPO has not officially commented. The industry source added, "Price increases are a strategy for memory makers, and rejecting them is a strategy for customers. Everyone has their own approach." When asked how long the memory boom could last, the source said, "Let's just look at it until the end of this year."
The current memory supercycle has seen profits that are almost entirely "price-driven" rather than "volume-driven." If prices begin to soften, the collapse in profit margins could be just as rapid. Another major point of divergence in the market is concern over long-term agreements (LTAs). While LTAs lock in prices, they also reduce profit flexibility for memory makers. More importantly, when market conditions change drastically, these agreements are often torn up, and customers demand renegotiation at new prices. This has happened before.
Anxiety Over the Market Peak
Anxiety over the market peak has increased significantly in recent weeks. The core concern is no longer simply "when will the peak arrive?" but rather "is the risk of a peak arriving earlier than expected?" This sentiment is driving sell-offs in the secondary market, causing memory stocks to fall sharply. The supply chain is also turning cautious, with consumer electronics makers showing resistance to price increases. One mobile phone company executive complained that rising memory prices are squeezing the entire industry's profitability, describing it as "digging out the ancestors' money," posing a huge challenge for handset makers.
Despite the growing anxiety, a near-term downturn in the memory industry seems unlikely. TrendForce has stated that AI will remain the primary driver of memory demand in 2027. However, the market dynamics for DRAM and NAND Flash are expected to diverge. For DRAM, continued allocation of capacity for HBM, strong AI server demand, and increased purchasing of CPU memory and HBM are expected to limit supply and push prices higher. In contrast, for NAND Flash, new capacity coming online is expected to lead to a period of supply easing in the second half of 2027, while consumer electronics demand remains weak, putting downward pressure on prices.
UBS believes that the second-quarter results demonstrate the strength and sustainability of the current semiconductor industry upcycle. While many catalysts for the memory sector have already been priced in over recent months, strong growth opportunities still exist in other semiconductor segments. UBS noted, "After years of rapid capital expenditure expansion, the spending needs of major tech companies may soon exceed their operating cash flow. As investors may increasingly demand stricter capital discipline, we acknowledge that the risk of lower-than-expected capital expenditure growth is rising. We do not expect US hyperscalers to raise their capital expenditure guidance again when they report earnings in the coming weeks. However, we believe the probability of them cutting capital expenditure in the near term is also low, as GPU rental prices have recently accelerated again, and some parts of the semiconductor supply chain remain constrained. We expect overall AI spending to approach nearly $1 trillion by 2027, although visibility on the trajectory beyond that is still limited."
Chris Caso, a senior analyst at Wolfe Research, argues that the current physical infrastructure is not yet large enough to trigger a "supply glut" cycle. He believes that the typical chip cycle trough is still years away, stating, "There simply isn't enough physical space to manufacture semiconductors today. This upcycle requires new infrastructure construction, which takes a long time. Even if we were to reach a supply glut scenario, it wouldn't happen until at least 2028." Regarding the supply outlook for DRAM and HBM, Caso added, "Memory chip suppliers are currently severely constrained by supply-side limitations and cannot increase production. This is the fundamental reason we are bullish on the memory sector."
Morgan Stanley also noted in a recent report that the market is currently too pessimistic. The price data that truly determines the health of the memory industry has not weakened and is actually stronger than the market anticipated. At the same time, a sharp divergence is occurring within traditional memory: the price increase pace of mainstream DRAM and NAND has fallen short of expectations, but traditional niche products like DDR4, SLC/MLC NAND, and NOR Flash are seeing sustained price increases due to supply shortages. Morgan Stanley wrote, "Our assessment is that traditional memory in the semiconductor industry is experiencing a tale of two extremes. The short-term opportunity lies in structural price increases in the niche market, while the long-term risk is the potential for a sharp downturn due to a supply-demand reversal."
However, there are different views on the drivers of the recent downturn. At the beginning of the semiconductor sector's sharp decline last week, renowned US economic commentator Jim Cramer warned investors to prepare for further losses, attributing the move more to market mechanics of "who is selling." He explained that the recent state of chip stocks is "hard to reverse" because the sellers driving the trend are "massive, motivated, and often leveraged." In other words, leverage is forcing the sell-off.
Despite the pressure from leveraged selling, JPMorgan Chase offered a relatively positive assessment in its latest "Flows and Liquidity" report. The bank suggested that the deleveraging process may be nearing its end, with significantly less room for further deleveraging. JPMorgan indicated that the pace of deleveraging in the technology and semiconductor sectors has been much faster than previously expected, suggesting that the most dangerous phase of the market may be passing, potentially allowing the memory sector to be re-priced.
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