Why Memory Chip Stocks Crashed Again After South Korea's Record Rebound

Broader Pressures Weighing on the Sector

Beyond the one-day profit-taking, several structural headwinds have been hammering memory and AI-chip stocks for weeks:

• AI spending sustainability fears – Investors increasingly worry that the massive capital expenditure on AI infrastructure may not deliver proportional returns. Bloomberg noted "the one-way trade in semiconductor stocks…coming unglued" as concerns grow that "the fire-hose of artificial intelligence spending won't continue" .
• China competition – Reports that a Chinese state-backed company began mass-producing immersion deep ultraviolet (DUV) lithography machines fueled anxiety about China's progress in advanced chipmaking .
• Margin-call cascade – Goldman Sachs data showed over 1.2 million South Korean retail investors who borrowed to buy stocks received margin calls, forcing forced selling that amplified the downturn .
• Slowing memory price momentum – In July, Kiwoom Securities cut Samsung's target price citing slower second-half memory price gains ; the Philadelphia Semiconductor Index (SOX) fell over 11% in two weeks and memory-focused ETFs like DRAM retreated roughly 25% from their June highs .
• Contagion to Western markets – The panic spread globally: the SOX fell as much as 6% in a single July session, the Nasdaq-100 dropped 9.7% from its record high, and U.S. memory names including Micron, Seagate, SanDisk, and Western Digital were routed .

Analyst Divide: Durable Downturn vs. Overreaction

Bearish / Cautious camp – Some analysts warn the sell-off has further to run. A July 17 note flagged that "too many bulls" remain in semiconductors, and if selling continues, forced capitulation could drive deeper losses . The rotation out of AI winners is seen as structural, with capital shifting from "shovel sellers" (chipmakers) to "miners" (AI application companies) .

Bullish / Overreaction camp – Bank of America analysts characterized the pullback as "a summer reset, not a fundamental reversal," arguing the semiconductor sector historically underperforms in the third quarter but the AI supercycle remains intact . Reuters reported on August 3 that global investors are "keeping faith with the heavyweight components in the Kospi, describing the shakeout as technical rather than fundamental" . Short interest in South Korean stocks ticked lower, and foreign buying smashed records on Friday, suggesting large institutional investors see the dip as a buying opportunity .

The core disagreement hinges on whether the AI capex cycle has peaked (bear case) or is merely rotating into a new phase (bull case). With the KOSPI still up sharply year-to-date despite the correction, the debate remains unresolved .