Why Memory Stocks Are Selling Off Tonight

Guys, welcome back. I'm on the road again. I'm in Vegas all week. So, I'm coming to you live from Vegas with this video. Got it out a little later than I wanted to. Apologize for that. But you probably see what I see right now. I'm looking on the plane, looking at my portfolio, looking at the stocks. It is red across the board. We are bleeding in every single memory stock right now. Not only the US players, but the Asian players as well. Micron is down sharply right now in the after hours or the pre-market. SanDisk down significantly. We are seeing SKH Highix and Samsung down significantly getting crushed right now in soul. They had to stop halt trading on the Kospi for a while based on the performance that we're seeing. We're seeing Kioa down in the NK225 and the Japanese trading. It is across the board. It would it looks like the AI memory trade may be breaking apart, but I don't think that's what's happening at all. I think the market is doing something a bit more sophisticated. It's no longer questioning AI demand. It's questioning how much perfection is already priced into these stocks. And that's a completely different investment problem. Tonight, we're going to break down three big forces or three big narratives right now that I believe are help are contributing to the global selloff that we see across the memory sector. And we're going to talk about why institutions are suddenly demanding a higher standard for the memory sector and what I'll be watching for exactly at the opening bell tomorrow with the US memory titans. So, let's get into the video. It's going to be a quick one tonight, guys, because like I said, I just got in here in Vegas and I'm feeling a little under the weather as well. So, I wanted to get this update out to you tonight. It was really important to me to make sure I drop something just to help explain what I think we're seeing right now with the memory sector. But, let's get into it. But if you haven't done it already, make sure you hit like and make sure you subscribe to the channel. So, let's go around the horn and take a look exactly what we're seeing right now. If I pull it up, you can take a look at the KOSPI. See, the KSPI is down by almost 8%. Just about 600 points right now. If we look at the NK225, we see it's down just about 2.3%, trading about 1,500 points down from where it started at the beginning of the day. And if we take a look at the individual players, take a look at Kioia, it's down by about almost 12%. It was actually a little higher a few moments ago, but it's about 12% right now. 11.5 12%. If we jump over to SKH, down by 13, almost 13.5% right now. Significant impact. Like I mentioned, they had to halt trading of the KOSPI earlier today because of what we're seeing right with with SKHix as well as Samsung. Samsung down by 9%. We know the weight of those two companies. They're about half of the index. Those two companies make up half of the index. So, when they're trading down like this, they just have a full halt of trading action and they stop it. We've seen them do it multiple times now over the last four or five weeks. Let's jump over and see how this is impacting the US players because we know the momentum that we see in the Asian markets comes right across across the Pacific into the US markets overall. Micron down right now. Take a look at the after hours what you see right there. $55 $56 at $92350 just almost almost 6% just below that 5.75%. So this is significant impact that we're seeing and this is across the board guys. If you take a look at SanDisk you can see SanDisk is listed as a postmarket mover. We're seeing Sandis down by about the same about 5.76% down by $113 trading right now at $1803. So significantly down kind of giving back a lot of the gains that we saw on Thursday and Friday of last week. Western Digital also listed as a postmarket mover. Unfortunately, a mover in the wrong direction that we're seeing. It's down by 5.3%. $31 trading at 50, you know, 55151. And then finally, if we jump over to Seagate, we see that Seagate is down by $38 just over down by in 4%, trading at 87190 right now. So, all of the memory titans are getting impacted. All of the legacy Fab 4 are getting impacted. But there is one that's different. SKH Highix, the ADR is trading a little differently right now. We see where it it closed on Friday at 16801 up $19 almost 13% and in the after hours right now it's about 2 and a.5% positive it's up by over $4 and guys I think this is part this is the one narrative that I wanted to get into the first one I think that is driving some of the sentiment it's this arbitrage unwind because we're seeing what we're seeing right now in my opinion is purely mechanical it's an arbitrage unwind where SKH we know They when they listed on Friday, they soared almost 13% that you can see and closed at 168. This created a massive valuation premium compared to the original shares traded locally in soul. Tonight, global hedge funds are ruthlessly executing a convergent playbook. They are shorting the overpriced ADRs in New York and dumping the primary shares in soul to pocket that 15% valuation spread. This is a technical move to bring two separate markets back into alignment, but it acts like a vacuum cleaner, sucking the liquidity out of the entire memory sector. And that's what we're seeing right now. Seeing every memory trade just gets sucked. It's this it's this unwind that we're seeing in the market. It is it is a it's not a fundamental collapse though. It's a price discovery event that is mechanically forcing the stock down. That is the one piece I think we're seeing right now for sure. I think the other factor that we're getting into is just this bit around, as I mentioned in the beginning, this price to perfection. I think we're seeing a little bit of this capex uh concern. The market has pivoted, you know, from celebrating AI growth to fearing the capex trap. We have all of the hyperscaler earnings coming up in two weeks. I think is a little bit of a forward look right now because what we saw with Samsung, SKHix and Micron, we know that those three companies are investing significant amount of money there. I think they're pouring like $130 billion into new fabrication facilities right now. While that sounds great for long-term growth, many professional institutional analysts are looking at this unprecedented scale and asking the terrified question, are we building too much capacity? Are we setting ourselves up for a structural supply glut for next year and beyond? For 2027 and beyond. And we know if we just remember what the SKHik CEO said, he said that 2027 is going to be the worst year that we have seen where demand will outstrip supply and we don't think we'll be able to catch up until 2030. But I do think many analysts still think back to the 2023 time frame where supply, the market did get overs supplied and it crushed the revenues. to crush the margins of these memory companies. We still see many analysts that just haven't shifted out of the cyclical thinking. They still think of the memory sector in the old time in the old kind of view, the old lens overall. They're not thinking it through the AI infrastructure, not only today with data centers, but what it'll mean with a Gentic, with edge, with robotics and moving forward. But they are concerned that what if the hyperscalers slow down in their capex? And I think that's what we're gonna that's a big question we're going to have to ask ourselves in the next couple weeks. We're gonna have to keep our ears open. What exactly will their commitment moving forward? Are they slowing down? Are they finding ways to monetize AI? That's going to be an important piece for us to listen to in the next couple weeks because we know that the market is no longer looking at the next quarter's profit. It is looking at the math three years down the road. And they're worried, analysts are worried that this AI super cycle will end with an industry-wide overupp that craters the high margin pricing power that these memory companies currently enjoy. This isn't about a bad earnings or missing a whisper number like we saw with Samsung. It's about the market pricing and the risk that the industry is overleveraging itself into a future price war that'll drive down the pricing power that these manufacturers currently hold. And then finally, I think the last narrative that is driving the sector right now or driving kind of the sell-off is the bubbling up of macro risk. Again, glo geopolitical macro risk. You see on your screen from market watch that oil prices rise, stock futures dip after latest flare up of strikes between US and Iran. So it seems like we are kind of repeating ourselves with narratives that we saw. We were hoping that that pre that peace treaty was signed and we were going to be past this. But fortunately over the weekend military strikes escalated between the US and Iran again. Iran has officially claimed that they have closed the straight of Hermoose and they we know the importance of that strait for world the world's oil supply. And because of that, Brent oil, Brent crude spiked 3% instantly. And when energy prices jump, inflation fears return, and the Fed's interest rate interest rate path becomes a nightmare. Algorithms are hardcoded to dump high beta, high valuation tech stock, the second a riskoff macro signal like this flashes, we are seeing institutional desks move out of growthheavy memory stocks into defensive hedges. This is a geopolitical circuit breaker being triggered on top of a technical sell-off. So those are the big themes that are affecting it. Both of those are kind of like a double whammy right now that is impacting the sector. So what should we look for tomorrow? At least what will I be looking for tomorrow when the stocks open up? I think we should expect to see a gap down. Everything we're seeing in the Asian markets right now, I think it will come across the Pacific. It's going to influence the US markets. It's going to influence what we are the memory titans here. We already see significant gapping down in the after hours right now. That will carry forward to the opening bell. I think we should expect to see a kind of violent gap down in all four of the memory stocks. The legacy Fab 4 at least with Micron SanDisk, Western Digital and Seagate. Uh would you probably see it within the first definitely within the first 30 minutes but it could carry for the whole morning session overall. I think we're for Micron. We need to look to see if that institutional floor, that 938 level, if we can hold that, is that going to be the institutional line in the sand because that's the piece we've seen before. We need to see if the market will defend that price point for for uh for Micron tomorrow because if it does, it shows us that the structural HBM shortage is still driving the valuation for this company that the whales are stepping in and they'll defend that price floor overall. And then finally, I will look for just absorption. If we see any massive block volumes entering the tape around that 938 level or just entering the tape period, that is the moment that we can recognize that smart money is moving in. That's the confirmation for us to see that the whales are buying the dip that we're going to see tomorrow morning. So guys, those are the biggest forces that I see right now that are driving the price action across all of the memory stocks globally right now. The headlines tomorrow though will definitely tell us a different narrative. They will say that the memory trade is breaking. But I don't think that's what today was. I think today was the market stress testing. One of the most crowded trades in the world. The companies didn't change. The fundamentals for these companies didn't change. The HBM shortages that we see in the market, they didn't disappear. The $250 billion manufacturing plants, they didn't vanish overnight. What changed was investor psychology. And if you're going to try to outperform other investors over the next decade, we have to learn the difference between that those two. We have to continue to follow the signals and trust the fundamentals that we see in the market. As I always say, find the companies that are solving the bottlenecks or the constraints in the market. So guys, my best advice tomorrow is try to ignore the noise at the opening bell because I think it's going to be rough. It could look ugly. It could be a volatile morning across the entire sector. But keep your eyes on the the institutional flows. Will they step back in? Will they find will we these companies find support? Let's keep our eye on what level that support steps in. And let's continue to keep our eyes on the signals in the market and just remember the fundamental strength of this sector overall. But I'll be back tomorrow after close to give a recap and give you my view on what I thought the trading action showed to all of us. But I hope you have a good night. I hope you enjoyed the video. Tuck ties.