🤖 We Said Buy. It Crashed

Good morning, hurt memory bulls.

On Monday we told you memory was the cleanest pricing power in the market. On Tuesday it fell off a cliff.

Today we cover why the crash and the call can both be right.

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$SKHY ( ▲ 14.57% ) reported on Tuesday. The numbers were absurd.

It also started mass production of HBM4, the fastest memory that goes next to an AI chip.

The stock fell -11%.

$MU ( ▲ 14.77% ) , $NVDA ( ▲ 2.93% ) and $AMD ( ▲ 13.08% ) fell with it.

The official reason: SK Hynix missed what analysts had penciled in.

Read the miss closely though.

They could not make enough chips. That is a supply problem, and supply problems mean demand is bigger than the factory.

Zoom out and it gets stranger.

Goldman's high-beta momentum basket, the crowded winners everyone piled into, is heading for its worst month on record.

High-flying AI names gave back a full year of gains in about four weeks.

It got weird enough that South Korea's Finance Ministry is now holding emergency meetings about capping leveraged single-stock ETFs in ordinary retail accounts.

Meanwhile, memory prices kept climbing the entire time.

That gap is the whole story.

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These stocks fell because of who owned them, not because of what they sell.

Here is the mechanic.

A leveraged ETF is a fund that borrows to double or triple your bet.

When the price drops, it is forced to sell to repay the loan, which pushes the price down again, which forces more selling.

Think of a crowded theater with one exit. The rush tells you how many people were inside.

It tells you nothing about a movie.

So while the exit was jammed, we checked the movie.

Memory lines are booked solid through 2027.

HBM4 pricing is set to go from about $2 per gigabit to $4 or $5 next year.

Micron killed its 30-year-old Crucial consumer brand in February to hand that supply to AI customers.

Even the fix is sold out. New factories arriving in 2028 are expected to sell their capacity within 6 to 12 months.

Add it up and Micron, SK Hynix and Samsung are tracked to earn $945 billion in combined operating profit by 2029, against roughly $501 billion this year.

So what does this mean for your portfolio?

Your near-term risk here is other people's borrowed money, not AI demand. Only one of those has a bottom you can measure.

JPMorgan reckons the forced selling out of Korea is roughly 90% done. That is the number to watch, not GPU orders.

We said on Monday that we remain bullish on memory. Three days and one ugly candle later, we still are.

The order book never moved. It was just a margin call.

Know someone who sold memory this week? Forward this to them →

Second Order is for information and entertainment only and is not financial advice.

We are not licensed financial advisors.

Any tickers or companies mentioned are our opinions, not recommendations to buy or sell.

Do your own research and consult a professional before making investment decisions.