Author: Su Yang, Tencent Technology
Storage Plummets, A Night of Panic
Overseas storage giants are at the center of a storm, with their combined market value plunging nearly $43 billion in a single night on July 28.
Over the past trading day, the stock movements of storage leaders such as SK Hynix and Micron were nothing short of a "nightmare." Both SK Hynix and Samsung Electronics fell more than 13%, collectively wiping out approximately $28 billion in market value. On Tuesday in U.S. stocks, Micron closed down 8.85%, SanDisk plunged 14.25%, Seagate dropped 8.53%, and Western Digital fell over 6.9%, cumulatively erasing about $14.8 billion in market value.
On Tuesday, screens in the trading room of Korea Aisa Bank in Seoul displayed the benchmark KOSPI index along with the closing prices of Samsung Electronics and SK Hynix stocks.
Public data shows that SK Hynix has declined by approximately 45% to 47% from its June high, with a market cap loss of nearly $600 billion; Micron Technology has corrected more than 30% from its peak; and Japan's Kioxia has shrunk by nearly half within a month.
In stark contrast to the stock price plunge, storage giants have just delivered their most outstanding financial results ever.
The logic that earnings cannot support the stock price
On July 7, Samsung Electronics released its preliminary second-quarter results, reporting an operating profit of 89.4 trillion Korean won for the quarter—an 18-fold year-over-year surge that even surpassed the combined profits of the entire 2023 to 2025 period. However, instead of boosting its stock price, this stunning financial report triggered a intraday plunge of over 10% for Samsung, dragging down the KOSPI index by nearly 5%.
The same phenomenon is also occurring among other giants.
SK Hynix announced its second-quarter financial results on the 29th, reporting revenue of 79.3 trillion Korean won, a 257% year-over-year increase; operating profit of 60.5 trillion Korean won, a 557% year-over-year increase; and an operating profit margin rising to 76%.
Micron Technology reported revenue of $41.5 billion for the fiscal quarter ending May 2026, a 346% year-over-year surge, with gross margin soaring to 84.6% and free cash flow reaching $17.6 billion. Micron’s management even boldly stated: “Demand far exceeds supply capacity, and this boom will continue through 2028.”
Fundamentals are scorching hot, yet the stock prices of storage leaders are plummeting. The first clue and possible trigger is the cross-market pairs arbitrage trade triggered by SK Hynix’s ADR issuance on U.S. markets—“long U.S. ADR, short Korean domestic shares.”
Bloomberg, citing a report provided by UBS to its clients, says that many global portfolio managers who previously did not include SK Hynix shares listed in Korea in their investment asset classes can now purchase the new SK Hynix ADR.
“Buying American depositary receipts from day one of issuance and selling South Korean common shares appears to be a risk-free trade,” UBS wrote in its report.
Another contributing factor relates to regulatory adjustments in South Korea.
On July 16, the Korea Financial Services Commission unexpectedly announced stricter regulatory rules for single-stock leveraged ETFs, raising the minimum margin requirement from 10 million KRW to 30 million KRW and limiting each individual to a maximum purchase of 20 shares per transaction.
JPMorgan analyst Nikolaos Panigirtzoglou noted that at the time, the position size of leveraged ETFs for memory chips accounted for three times the proportion of the market capitalization of the underlying companies compared to regular stock ETFs. During the price decline phase, the mandatory end-of-day rebalancing mechanism of leveraged ETFs triggered automated selling, instantly creating a "flood of liquidations."
On that day, SK Hynix fell another 11%, Samsung plunged over 8%, and panic quickly spread across Europe and the United States.
Looking at a longer time horizon, the recent pullback in storage-related stocks has been linked to concerns about an "investment return imbalance" regarding AI investments and related capital expenditures by Silicon Valley giants.
On July 22, Google released its second-quarter earnings and raised its full-year capital expenditure guidance from $180–190 billion to $195–205 billion, yet its stock declined both after hours and the following day, primarily because relentless high capital spending pressured free cash flow and the return on AI investments remains uncertain. This is also a challenge that Microsoft, Amazon, Meta, and others will soon face.
Rating agency Moody’s has also issued a timely warning: the annual $1 trillion AI arms race is forcing cash-rich giants like Google and Microsoft to rely excessively on debt and off-balance-sheet financing, with the combined direct debt of the six major cloud providers now reaching approximately $460 billion.
This means that even a slight miss in the giants' guidance could lead to a repricing of the highly sensitive HBM supply chain stocks.
Kim Jin-hyuk, an analyst at Shinhan Securities, summarized: «As investors refocus their attention on concerns regarding the sustainability of the AI investment cycle and the growing competitiveness of China’s memory industry, market risk-off sentiment has been fully ignited.»
The combination of the above factors led to storage-related stocks experiencing a "Black Tuesday" on July 28.
Sundeep Gantori, Chief Investment Officer for Equities at Standard Chartered Bank, said the current sell-off reflects an overall deterioration in market sentiment toward the semiconductor sector, with some institutions even predicting in their latest research reports that memory prices will peak by 2027.
"The Big Short": Clearly shorting storage
At the peak of market panic, Michael Burry, the real-life inspiration for "The Big Short," publicly disclosed in his personal column that he is heavily shorting the memory chip sector and continues to increase his position.
Review Barry’s position buildup: On July 2, he first established a short position in Micron Technology at an entry price of approximately $1,051.87; on July 25, he added to his short positions in Micron (at $933.86) and NVIDIA (at $210.28), while also initiating a short position in the SOXX semiconductor ETF.
Barry bets heavily on shorting storage, primarily based on three reasons:
First, the valuation is severely deviating from the moving average. As the only pure DRAM stock on U.S. exchanges, Micron has experienced 34 drawdowns exceeding 30% over its 42-year history. Currently, its stock price is trading at the widest deviation from the 200-day moving average since 1984, surpassing even the peak of the 2000 dot-com bubble.
Second, the return on capital is extremely mediocre. Micron’s long-term median ROIC (Return on Invested Capital) is only 4%, and its ROE (Return on Equity) is just 7%. Historically, about one-third of its quarters have actually been in a state of “destroying capital.”
Third, there is a risk of inflated end-demand. Barr believes that the strong demand triggered by NVIDIA is not entirely driven by genuine end-consumer consumption, but rather by an illusion fueled by off-balance-sheet financing and capital recycling arrangements, citing the BIS 2026 Annual Report as evidence.
"Bearish" Barry shorts storage stocks
Regarding the recent expansion plans announced by the Korean giant, Barry went further, asserting that this marks the "turning point from boom to bust" in the semiconductor cycle, and expects the entire sector to see a correction of at least 30%.
However, there are also opposing voices in the market. Bullish investors argue that Micron’s latest quarterly report is the best in the company’s history, with revenue, profit margins, and cash flow all hitting record highs.
CoinCentral’s analysis highlights Barry’s true reasoning: he is not betting on an immediate collapse in end-demand, but rather on storage manufacturers’ capital expenditures spiraling out of control—Micron’s own $27 billion capital spending is sowing the seeds for a future crash in the next downturn cycle.
High Stakes and Consequences
In the weeks leading up to the "stampede," the global storage industry was immersed in an unprecedented "super抱团."
At the San Francisco AI Summit on July 24–25, SK Group signed a long-term agreement worth over $500 billion with NVIDIA to secure HBM supply and co-develop HBM4, bringing the total scale, including partnerships with Microsoft and Anthropic, to approximately $750 billion.
Samsung Electronics has simultaneously signed a memorandum of understanding with Broadcom worth up to $200 billion. Combined, the two deals, totaling approximately $950 billion, have been dubbed by foreign media as the largest long-term semiconductor supply commitment in history.
At the same time, AMD acquired MEXT in an attempt to use flash memory to "mimic" DRAM and reduce memory costs, while Meta and SanDisk secured long-term NAND supply agreements.
The latest collaboration among Silicon Valley giants has not provided a positive boost to memory stock concepts. More than short-term stock fluctuations, what truly unsettles long-term investors is a super-industrial plan introduced by the South Korean government at the end of June—Samsung and SK Group will jointly invest 800 trillion Korean won (approximately $516 billion) to build four new wafer fabs in southwestern Korea, aiming to double memory chip production capacity within five years.
Including the accompanying 550 trillion won HBM packaging hub and data center construction, the total investment reaches 1,350 trillion won (approximately $880 billion), equivalent to 5% of South Korea’s 2024 GDP.
The original manufacturer's expansion of production capacity signifies that the industry's two-year-long "supply model" and strict financial discipline have been broken.
Over the past two years, memory manufacturers successfully pushed memory chip prices back to high levels by strictly controlling production and shifting capacity toward high-margin HBM. Now, SK Hynix is expected to significantly increase its 2026 capital expenditure by 43% to 40 trillion Korean won, while Micron’s 2026 fiscal year capital expenditure is also projected to double year-over-year.
Morningstar analyst Jing Jie Yu warned that as these new production capacities come online en masse between 2027 and 2028, the industry will inevitably face severe price erosion.
Analysis firm AInvest stated that the original equipment manufacturers' capacity expansion is no longer a triumphant march driven by AI demand, but rather a replay of the production overcapacity crash cycle from 2022 to 2023.
Although it typically takes 18 to 24 months for a wafer fab to move from construction to full capacity, such as Samsung’s P5 facility, which is scheduled for mass production in the second half of 2027, TrendForce also assesses that the supply-demand imbalance in DRAM will be difficult to fundamentally reverse before then. However, stock markets always trade on expectations, not current conditions.
It can be said that South Korea’s massive expansion plan shattered the market’s illusion of “sustainably high chip prices.” The storage sector’s “nightmare overnight” is essentially a disconnect between fundamentals and expectations.
Sensitive capital markets are now pricing in the potential oversupply of 2027. According to Barry’s expectations, the window for mass production by new Korean factories in the second half of 2027 through 2028 will be the real test for the memory industry.
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