Storage chip stocks surge amid policy support and renewed AI demand

Last night's U.S. stock market rally was so strong that even the term "violent rebound" seems understated.

SK Hynix rose 17.52%, SanDisk rose 25.99%, Micron rose 18.36%, Microsoft rose 15.51%, and even the VIX fear index dropped 17.28% in a single day. Just days ago, the memory chip sector was in freefall—now, it has staged a dramatic reversal overnight.

Such a strong rebound is never driven by a single factor—it’s the result of multiple forces aligning: South Korea’s market rescue, cooling U.S. inflation, Microsoft’s earnings report, and a short squeeze. But before getting excited, one question must be clearly answered: Is this the beginning of a true reversal, or just a classic "dead cat bounce"?

First, let’s look at the lead from the epicenter of this storm—South Korea.

Following several consecutive days of sharp declines, the Korea Exchange (KRX) has internally assessed the technical feasibility and system preparation time required to temporarily ban short selling, while also examining the practicality of narrowing the current 30% price limit band. The Ministry of Economy and Finance has also convened an "Emergency Market Conditions Assessment Meeting," after which it reaffirmed the highest level of market alertness and activated a cross-departmental 24-hour monitoring mechanism.

This market rescue is also politically sensitive. The South Korean government previously actively encouraged retail investors to participate in the AI chip stock surge led by Samsung Electronics and SK Hynix. Now, with retail investors suffering massive losses within 48 hours, authorities are caught in a dilemma—ignoring the situation is politically untenable, but intervening risks distorting market pricing.

For this reason, the measures introduced so far appear genuinely sincere. The expectation of a short-selling ban, combined with discussions on narrowing price fluctuation limits, can significantly curb short-term selling pressure. For the market, this at least signals one thing: the policy bottom has already emerged ahead of the market bottom.

In yesterday’s article, we mentioned that the key to the storage sector stabilizing after its decline lies not in how low prices fall, but in how far South Korea’s leverage is unwound.

Now let's see how far the clearing has progressed.

The KOSPI index has successively broken below its 50-day, 100-day, and 200-day moving averages during this downturn, signaling a complete technical breakdown. Leveraged ETF assets have plummeted from a peak of over $50 billion in June to approximately $16 billion, a decline of nearly 70%.

This figure is critical. Although it’s hard to say that all leverage has been fully unwound, a 70% reduction in leveraged funds indicates that deleveraging has clearly entered its later stage—the most intense period of forced liquidations has most likely passed, and the remaining selling pressure is now more emotional than mechanical.

South Korea’s policy support, combined with the nearing completion of deleveraging, is the first reason why the rebound ignited first in Asian markets.

The second reason comes from the United States.

Last night’s release of the U.S. Q2 core PCE inflation data showed cooling inflation, causing a sharp decline in near-term rate hike expectations and a sudden easing of macro liquidity expectations.

Even more significant is Microsoft. Its fiscal fourth quarter 2026 earnings report was explosive: revenue reached $90 billion, up 18% year-over-year; Azure and other cloud services growth accelerated from 40% in the prior quarter to 43%; CEO Satya Nadella explicitly stated that Azure’s full-year revenue “exceeded $100 billion,” growing 41%—marking the first time this business crossed the $100 billion threshold.

The market has voted with real money: Microsoft surged over 15% in a single day, marking the largest single-day market capitalization gain for any stock in Wall Street history and its biggest one-day jump in 18 years. Coupled with the end of selling pressure from the liquidation of major AI funds, tech stocks and momentum stocks collectively staged a powerful short squeeze rebound.

Why is Microsoft’s earnings report so important for the storage sector? Because the underlying narrative behind the previous sharp decline in memory chips was market concern that "the AI bubble had burst" and capital expenditures were unsustainable. Microsoft’s earnings report directly answered: demand isn’t slowing down—it’s accelerating. The narrative has been disproven, triggering short covering and naturally leading to an exaggerated rally.

If the above content made you think, "That's impressive," then we recommend you take a moment to calm down before proceeding.

Japan’s inflation accelerated for a second consecutive month, raising expectations that the Bank of Japan may raise interest rates again in the coming months. Data from the Ministry of Internal Affairs and Communications showed that Tokyo’s core CPI rose 1.9% year-over-year in July, above the market expectation of 1.8%; the “core-core CPI,” excluding fresh food and energy, increased by 2%, and the overall CPI also rose by 2%. Takeshi Minami, Chief Economist at the Nohrin Chuo Bank Research Institute, expects inflation to remain above 2%.

The market generally expects the Bank of Japan to hold interest rates steady at 1% at this week’s meeting, but it may signal further rate hikes ahead.

What does this mean for global markets? It means the cost of the U.S.-Japan carry trade is rising. The severe market turbulence in August 2024 was triggered by large-scale unwinding of yen carry trades. If Korea’s deleveraging was the visible thread in this cycle, then the expectation of Japanese rate hikes is the invisible thread hanging overhead—it won’t determine whether a rebound occurs, but it will determine how far it can go.

Microsoft's earnings report addressed the question of whether AI capital expenditures can be sustained, but another question remains to be verified: Can the semiconductor industry maintain its high profitability as the supply cycle progresses and China's ChangXin Memory Technologies goes public?

To assess the strength of this rally, keep an eye on the following:

• Can the stored shares hold their gains, and let’s avoid another surge followed by a pullback in Korean stocks;
• Can the prices and orders for HBM, DRAM, and NAND continue to be revised upward?
• And three key time windows—the Future Storage Conference on August 4, SK Hynix’s HBM4 volume ramp progress in Q3, and NVIDIA’s earnings report on August 26.

To summarize the situation: the policy bottom has emerged, leverage deleveraging is entering its final stage, and AI demand narratives have been reaffirmed by Microsoft. However, with Japan’s interest rate hike expectations yet to materialize and storage supply cycles unverified, it’s far too early to loudly declare a bull market return.

For investors, the worst mistakes in this market are two things: panicking and selling at the bottom, and chasing prices aggressively during a sharp rebound. What truly matters is discipline—avoid going all-in at the early stage of a rebound; instead, wait for confirmation signals and gradually build positions. Rely on position management rather than price prediction.

This is also the investment philosophy that BIT Broker has consistently emphasized. At this juncture, investors may also consider using BIT Broker’s options functionality to hedge their underlying assets, preparing for upcoming market movements while waiting for the market to provide clarity.

Disclaimer:

This article is a guest contribution from an external author, and the views expressed herein are solely those of the author and do not represent the positions, opinions, or views of BIT or its affiliated companies. The information provided in this article is for reference purposes only and does not constitute any investment advice, offer, recommendation of securities or financial products, nor should it be relied upon as the basis for any investment decision. Financial markets involve risks, and the prices of related assets may experience significant fluctuations. Investors should make independent investment decisions based on their own circumstances and assume full responsibility for any associated risks.