Memory-chip manufacturers and storage-hardware companies lost an estimated $43 billion in market value on July 28, as a sharp sell-off hit Seoul, New York and Tokyo despite record earnings across much of the sector. The move places a growing question over the AI infrastructure trade: whether the enormous data-center buildout now underway can sustain semiconductor valuations before another wave of memory capacity reaches the market.
SK Hynix and Samsung Electronics each dropped more than 13% in Seoul, erasing roughly $28 billion in combined value. In the United States, Micron Technology fell 8.85%, SanDisk lost 14.25%, Seagate Technology declined 8.53%, and Western Digital fell more than 6.9%, together shedding about $14.8 billion.
The declines were particularly severe because they followed a period in which high-bandwidth memory, or HBM, had become one of the market’s clearest ways to gain exposure to AI data centers. HBM is the high-speed memory used alongside advanced AI processors, and SK Hynix, Samsung and Micron are among the suppliers racing to expand production.
Record earnings did not stop the sell-off
The market reaction clashed with recent company results. Samsung Electronics said in preliminary second-quarter figures released July 7 that operating profit reached 89.4 trillion won, an 18-fold increase from a year earlier. The company’s reported operating profit also exceeded its combined profits from 2023 through 2025, according to the preliminary release.
Samsung shares nevertheless fell more than 10% intraday on the day of its announcement, while South Korea’s KOSPI dropped nearly 5%.
SK Hynix reported second-quarter revenue of 79.3 trillion won, up 257% from a year earlier, and operating profit of 60.5 trillion won, a 557% increase. Its operating margin reached 76%, reflecting the pricing power that memory suppliers have enjoyed during the AI-led shortage of advanced memory products.
Micron, in results for the fiscal period ending May 2026, reported $41.5 billion in revenue, up 346% year on year. The company posted an 84.6% gross margin and $17.6 billion in free cash flow.
Those figures have not insulated the companies from a rapid valuation reset. SK Hynix had fallen roughly 45% to 47% from its June peak, while Micron was down more than 30% from its high. Japan’s Kioxia had declined by nearly half over a month.
The pattern suggests that traders are increasingly focused on the durability of future earnings rather than the strength of the latest quarter. Memory chips have historically been one of the most cyclical areas of technology: tight supply can lift prices and margins quickly, but heavy industry investment can later produce excess inventory and steep price declines.
Leveraged products added pressure in Seoul
Part of the July 28 move was linked to positioning in South Korea’s equity market. Market commentary pointed to paired trades involving SK Hynix’s U.S.-listed American depositary receipt and its Korea-listed shares, with some participants buying the ADR while selling the local stock.
A regulatory change also appears to have increased the risk of mechanically driven selling. South Korea’s Financial Services Commission tightened rules for single-stock leveraged exchange-traded funds on July 16. The rules raised the minimum margin threshold from 10 million won to 30 million won and capped purchases at 20 shares per person per transaction.
Nikolaos Panigirtzoglou said leveraged ETF positions in memory-chip products had reached three times the market-capitalization share seen in conventional stock ETFs. In a falling market, leveraged funds must often rebalance near the end of the trading day to maintain their target exposure. That process can force automated sales and intensify a late-session decline.
The episode shows how a small number of highly popular AI-linked shares can become vulnerable when derivatives, leveraged funds and cross-listed securities all concentrate around the same trade.
AI spending faces a cash-flow test
The memory sell-off also coincided with renewed scrutiny of the spending plans of the largest cloud and platform companies. Alphabet’s Google raised its full-year capital-expenditure range on July 22 to $195 billion to $205 billion, from $180 billion to $190 billion. Its shares fell in after-hours trading and again the next day.
The spending is directed largely toward data centers, servers, networking equipment and AI computing capacity—areas that support demand for advanced memory. Yet rising capital expenditure can weigh on free cash flow even when revenue continues to grow.
Moody’s said an AI investment cycle approaching $1 trillion annually has pushed major cloud providers toward heavier use of debt and off-balance-sheet financing. The ratings agency estimated that the six largest cloud-service providers carry about $460 billion in combined direct debt.
Michael Burry, the founder of Scion Asset Management, has publicly disclosed bearish positions tied to the memory sector, including Micron, before adding positions involving Nvidia and the SOXX semiconductor ETF. Burry argued that Micron’s share price had stretched unusually far above its 200-day moving average, a measure he said had reached its widest deviation since 1984.
He also cited Micron’s long record of drawdowns, saying the company had suffered declines of more than 30% on 34 occasions over 42 years. The argument rests on the risk that a period of extraordinary memory margins could encourage suppliers to build too aggressively.
Supply plans put 2027 in focus
South Korea’s largest chip groups are planning an unprecedented expansion. Samsung and SK Group have outlined 800 trillion won, or about $516 billion, for four new fabrication plants in the country’s southwest, intended to double memory-chip capacity within five years. A further 550 trillion won has been associated with HBM packaging hubs and data-center construction.
The combined 1,350 trillion won program, estimated at about $880 billion, would equal roughly 5% of South Korea’s 2024 gross domestic product.
SK Hynix’s 2026 capital expenditure is projected to rise 43% to 40 trillion won, while Micron’s fiscal 2026 spending is expected to double year on year. New fabs generally take 18 to 24 months to move from construction toward meaningful output. Samsung’s P5 facility is expected to begin ramping in the second half of 2027.
TrendForce expects DRAM supply conditions to remain tight until then. Equity markets, though, are already looking beyond the current shortage and pricing the possibility that capacity additions could weaken memory pricing in 2027 and 2028.
The semiconductor decline also creates a more cautious backdrop for crypto markets, which have increasingly traded alongside growth equities during periods of stress. A 90-day correlation between Bitcoin and the Nasdaq 100 reached 0.46 earlier this year, indicating that Bitcoin has not consistently behaved as an isolated defensive asset when technology valuations reprice.
With the MSCI World Semiconductor Index down roughly 13% during July, the immediate pressure is less about a confirmed collapse in AI demand than a reassessment of how much future spending, debt and chip capacity current valuations can absorb.
For deeper insight into macro shocks driving chip and AI markets, explore our macro series in today AI moves shake markets.
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