The memory craze paused in July—and investors got a much-needed reality check.
American memory suppliers Sandisk and Micron Technology fell 47% and 29% for the period, respectively. Sandisk notched its worst monthly performance since spinning off from Western Digital in February 2025, while Micron capped off its worst month since 2015.
Korean competitors SK Hynix and Samsung Electronics also fell sharply to start the second half of the year, shedding 35% and 21% in July, respectively. The Roundhill Memory exchange-traded fund -- best known as the DRAM ETF -- tumbled 32% to its lowest mark since mid-May.
The story involved plenty of speculation gone wrong, both in South Korea and in the U.S. But the good news is that the memory trade has reset to levels more palatable for new investors.
Memory stocks surged by triple-digit percentages over the last year as scarce supply and insatiable artificial-intelligence demand drove prices to historic highs. Micron, for instance, doubled earnings quarter-over-quarter in its June results, with an operating margin of 81%.
Where there is money to be made, there is often also questionable behavior. In South Korea, where memory names dominate the local stock market, scores of investors have borrowed money to invest in the AI boom, amplifying volatility.
The U.S. doesn't have the same concentration risk, but that kind of speculation can still travel across the Pacific. The listing of SK Hynix depositary receipts on Nasdaq on Jul. 10 made it even easier.
The mood around memory stocks "feels a little crypto-like," Marta Norton, chief investment strategist at Empower Investments, told Barron's on Thursday. Whatever your opinion of cryptocurrency, the volatility attracts people looking for easy money.
Mere minutes after Norton's comments, The Wall Street Journal reported that the hedge fund Situational Awareness had sold most of its holdings to Citadel after suffering huge losses. Sandisk was Situational's largest holding.
Don't expect the memory trade to get less wild. Over the last three months, Roundhill's DRAM ETF has a beta -- a common measure of volatility -- of 5.2, meaning it is about five times more volatile than the broader market.
But August could be a better entry point for investors willing to put up with the big swings. The DRAM ETF now trades at 4.8 times projected earnings over the next 12 months, down from a high of more than 10 times in late June.
Every indication is that the current AI-driven memory cycle is still on an upswing. Earlier this week, SK Hynix earnings fell short of analysts' expectations for the second quarter, but the company still posted a 257% year-over-year jump in operating income.
New capacity will come online at some point, adding to supply and pushing down margins. For now, memory suppliers are locking in long-term agreements and flexing their pricing leverage.
There isn't much evidence that the demand will "disappear overnight," Norton said.
The next test of industry-wide demand will come on Aug. 5, when Sandisk reports its fiscal fourth-quarter earnings. Wall Street expects both revenue and average prices to more than quadruple from a year ago.
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