Overseas storage giants find themselves in the eye of the storm, with a combined market value plummeting by nearly $43 billion overnight on July 28.
During a single trading day, the stock prices of storage leaders such as SK Hynix and Micron experienced a "night of horror." Both SK Hynix and Samsung Electronics saw their stock prices drop by over 13%, resulting in a total market cap loss of around $28 billion. In the U.S. stock market on Tuesday, Micron fell by 8.85%, SanDisk plunged by 14.25%, Seagate dropped by 8.53%, Western Digital fell by over 6.9%, with a combined market cap evaporation of around $14.8 billion.
Public data shows that SK Hynix has retraced approximately 45% to 47% from its high point in June, with a market cap shrinkage of nearly $60 billion; Micron Technology has retraced over 30% from its peak; and Kioxia of Japan has shrunk by nearly half in a month.
In stark contrast to the stock price freefall, the storage giants had just delivered the most dazzling performance in history.
The Logic of Performance Failing to Support Stock Prices
On July 7, Samsung Electronics released its preliminary second-quarter earnings, with a quarterly operating profit of 89.4 trillion Korean won, a year-on-year surge of 1,800%, even surpassing the total profit for the years 2023 to 2025 in a single quarter. However, this stunning financial report not only failed to boost the stock price but also caused Samsung to plummet by over 10% intraday, dragging down the KOSPI index by nearly 5%.
A similar phenomenon unfolded with other giants.
SK Hynix announced its second-quarter financial report on the 29th, showing revenue of 79.3 trillion Korean won, a 257% year-on-year growth; an operating profit of 60.5 trillion Korean won, a 557% year-on-year increase, with an operating profit margin climbing to 76%.
As of May 2026, Micron Technology's quarterly revenue reached $41.5 billion, a 346% year-on-year surge, gross margin soared to 84.6%, and free cash flow reached $17.6 billion. Micron's management even made a high-profile statement: "Demand far exceeds supply capacity, and this boom will continue until 2028."
The fundamentals are scorching hot, but the stock prices of key players in the storage industry are plummeting. The first clue and a possible trigger is the cross-market arbitrage trades sparked by SK Hynix's ADR issuance in the US—a strategy of "long ADR, short local Korean stock."
Bloomberg cited a report provided to clients by UBS, stating that many global portfolio managers who had not previously included Korean-listed SK Hynix shares in their asset allocation can now buy the new SK Hynix ADR.
“Buying the American depositary receipt from day one and selling the Korean common stock seems like a risk-free trade,” UBS wrote in the report.
Another driving factor is related to regulatory changes in South Korea.
On July 16, the Financial Services Commission of South Korea suddenly announced tightened regulations on single-stock leveraged ETFs, significantly increasing the minimum margin threshold from 10 million Korean won to 30 million Korean won and limiting individual purchases to a maximum of 20 shares per transaction.
JPMorgan analyst Nikolaos Panigirtzoglou pointed out that at the time, the size of storage chip leveraged ETF positions as a percentage of the related company's market cap had tripled that of ordinary stock ETFs. During a stock price downturn, the forced closing rebalancing mechanism of leveraged ETFs triggered programmed automatic selling, instantly causing a “liquidity crunch.”
On that day, SK Hynix plummeted over 11%, Samsung tumbled over 8%, and panic quickly spread to Europe and the US.
Looking at a longer time frame, the retracement of storage concept stocks in recent times is related to Silicon Valley giants' AI investments and concerns about “investment return imbalance” in related capital expenditures.
On July 22, Google released its Q2 earnings report and raised its full-year capital expenditure guidance from $180–190 billion to $195–205 billion. However, the stock price fell after-hours and the next day, primarily due to endless high capital expenditures suppressing free cash flow and the uncertainty of AI investment returns. This is also a challenge that Microsoft, Amazon, Meta, and others will have to face next.
Ratings agency Moody's also timely issued a warning: the nearly $1 trillion annual AI arms race is forcing Google, Microsoft, and other cash-rich giants to over-rely on debt and off-balance-sheet financing. The total direct debt of the top six cloud service providers is currently around $460 billion.
This implies that as long as the giants' guidance falls slightly short of expectations, the market will reprice highly sensitive HBM supply chain stocks.
New Korea Securities analyst Kang Jin-hee summed it up: "As investors refocus their attention on the sustainability of the AI investment cycle and concerns about the strengthening competitiveness of the Chinese storage industry, market risk aversion has been thoroughly ignited."
With the aforementioned reasons combined, storage stocks experienced a "Black Tuesday" on July 28.
Standard Chartered Bank's Chief Investment Officer for Equities, Sundeep Gantori, stated that the current sell-off reflects an overall deterioration in market sentiment towards the semiconductor sector, with some institutions even predicting in their latest research reports that storage prices will peak in 2027.
"The Big Short": Taking a Bold Stance on Shorting Storage
At the most panicked moment of market sentiment, 'The Big Short' prototype Michael Burry publicly disclosed through a personal column that he is actively shorting the storage chip sector and continues to add to his position.
Reviewing Burry's accumulation strategy: on July 2, he initially took a short position on Micron Technology, entering at around $1051.87; on July 25, he further increased his short positions on Micron (trading at $933.86) and Nvidia (trading at $210.28), while also establishing a short position on the SOXX semiconductor ETF.
Burry's heavy bet on shorting storage is mainly based on three points:
First, valuation is significantly deviated from the mean. As the only pure DRAM target in the US stock market, Micron has experienced 34 sharp declines of over 30% in its 42-year history. The current deviation of its stock price from the 200-day moving average has hit a record high since 1984, even surpassing the peak of the 2000 dot-com bubble.
Second, the return on invested capital is extremely mediocre. Micron's long-term median ROIC is only 4%, with an ROE of only 7%, and about one-third of quarters in history have actually been in a state of "capital destruction."
Third, there is a risk of inflated end demand. Burry firmly believes that the strong demand driven by Nvidia is not entirely from genuine end consumption but is based on illusions driven by off-balance sheet financing and capital recycling arrangements, citing the Bank for International Settlements (BIS) 2026 annual report as evidence.
Regarding the recent expansion plan announced by the South Korean giant, Barry went so far as to assert: This is a "turning point from prosperity to decline" in the semiconductor upcycle, with the entire sector expected to experience a minimum of a 30% pullback.
However, there are also voices of dissent in the market. Bulls believe that the quarterly report just released by Micron is the most impressive in the company's history, with record-breaking revenue, profit margins, and cash flow.
An analysis by the tech media CoinCentral points out the true logic behind Barry's bet: he is not betting on an immediate collapse in end-demand but is gambling on the out-of-control capital expenditures of memory fabs—Micron's own colossal $27 billion capex is sowing the seeds of a "plunge" in the next downturn cycle.
A High-Stakes Gamble and Its Cost
Just a few weeks before the "stampede," the global storage industry was still immersed in an unprecedented "supercluster."
At the AI summit in San Francisco on July 24-25, the SK Group signed a long-term agreement worth over $500 billion with NVIDIA, securing HBM supply and jointly developing HBM4, in addition to collaborations with Microsoft and Anthropic, with a total scale of about $750 billion.
At the same time, Samsung Electronics synchronized with Broadcom to sign a memorandum of understanding worth up to $200 billion. The combined $950 billion mega-deals of the two companies were referred to by foreign media as the largest-ever semiconductor long-term supply lock-ins.
AMD's acquisition of MEXT attempted to "disguise" DRAM with flash memory to reduce memory costs, while Meta and SanDisk locked in years-worth of NAND supply.
The new round of clustering by Silicon Valley giants did not have a positive impact on storage concept stocks. Rather than short-term stock price volatility, what truly unsettled long-term funds was a super-industry plan announced by the South Korean government at the end of June—Samsung and the SK Group will jointly invest 80 trillion Korean won (approximately $51.6 billion) to build four new wafer fabs in the southwest of Korea, aiming to double the memory chip capacity within five years.
Combined with the accompanying 55 trillion Korean won HBM packaging hub and data center construction, the overall investment scale reaches a staggering 135 trillion Korean won (about $88 billion), equivalent to 5% of Korea's GDP in 2024.
The intensified expansion of memory fabs implies that the industry's two-year "supply mode" and strict financial discipline have been broken.
Over the past two years, memory manufacturers have relied on strict production control and skewed capacity towards high-margin HBM to successfully drive memory chip prices back up. Now, SK Hynix's capital expenditure for 2026 is expected to jump significantly by 43% to 40 trillion Korean won, and Micron's capex for the 2026 fiscal year is also set to double.
Morningstar analyst Jing Jie Yu has warned that as these new capacities come online from 2027 to 2028, the industry will inevitably face severe price erosion.
Analytics firm AInvest has stated that original factory expansions are no longer a victory parade driven by AI demand, but a replay of the 2022 to 2023 capacity oversupply crash cycle.
While it typically takes 18 to 24 months from construction to capacity realization for a wafer fab, with Samsung's P5 fab slated for volume production in the second half of 2027, TrendForce has also assessed that before this time, the tight supply of DRAM is unlikely to be fundamentally reversed. However, the stock market always trades on expectations rather than the present moment.
It can be said that South Korea's super expansion plan has shattered the market's illusion of "sustainable high chip prices per unit." The "nightmare" in the memory sector is essentially a disconnect between fundamentals and expectations.
Now, the sensitive capital market has started to price in the potential oversupply in 2027 ahead of time. According to "The Big Short" investor Michael Burry's expectations, the time window from the second half of 2027 to 2028, when the new Korean factories will ramp up production in earnest, will be the true test for the memory industry.
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