RP Trader

This selloff in memory stocks makes absolutely NO sense to me. $MU, $SNDK, Samsung and SK Hynix are getting hit after China's CXMT announced progress on its new 4F² DRAM architecture, with plans to introduce DDR5 server memory using the technology by the end of 2026. For those unfamiliar, this technology is designed to pack more memory cells into the same amount of space, potentially improving chip density and manufacturing efficiency. Now, I want to make something clear. CXMT is absolutely becoming a legitimate competitor because acording to TrendForce, CXMT has already captured roughly 9.5% of global DRAM revenue, up from 7.6% the previous quarter, making it the fourth largest DRAM manufacturer globally. The company is also expanding aggressively, with new manufacturing facilities in Shanghai and Hefei targeting more than 600,000 wafers per month, potentially doubling its manufacturing capacity. On top of that, CXMT has reportedly started mass production of its G5 DRAM platform and LPDDR6 memory, while its new 4F² architecture could make memory production even more efficient. But here's why I think the market is getting WAY ahead of itself. First, announcing a new memory architecture and successfully manufacturing it at scale are two completely different things. CXMT still needs to prove it can deliver competitive yields, pricing, reliability, and production volumes. Second, we're currently dealing with an enormous memory supply shortage, particularly as hyperscalers continue increasing AI infrastructure spending. Even if CXMT successfully doubles its capacity, that doesn't automatically mean the industry becomes oversupplied. Demand for memory is expected to grow substantially over the next several years, and we're already seeing manufacturers secure longer term supply agreements with customers. Third, this announcement is primarily focused on conventional DDR5 server memory, NOT HBM. That's an important distinction because HBM is becoming one of the most valuable parts of the memory industry, with Micron, Samsung, and SK Hynix benefiting from enormous AI demand. And SanDisk primarily manufactures NAND flash memory, not DRAM. So selling $SNDK specifically because of a DDR5 technology announcement seems even more questionable. Now, that doesn't mean CXMT won't eventually put pressure on conventional DRAM prices. Increased Chinese manufacturing capacity is absolutely something investors should monitor, especially over the longer term but I think investors are confusing a legitimate long term competitive threat with an immediate change in industry fundamentals. Nothing about today's announcement suddenly creates millions of additional memory chips, eliminates existing supply shortages, or changes the amount of memory needed to power AI infrastructure. I've been saying this for months. The amount of memory we're going to need over the next decade is INSANE. Bullish on memory, if you want to see how I’m investing around the companies that could benefit from this massive increase in global memory demand, check out my portfolio below. link.milkroad.com/tx5qip