DRAM ETF: Why It’s Falling, and Outflows Are Rising Despite Strong Micron, SanDisk and Samsung Earnings

The Roundhill Memory ETF (CBOE: DRAM) extended its sell-off and is hovering near its lowest level since April 28, as memory stocks continue to decline despite recent earnings that showed strong revenue and profit growth. The fund has dropped to $37, down 54.4% from its high this year.

DRAM ETF Outflows Are Accelerating Despite Strong Memory Growth

Investors are dumping their DRAM holdings aggressively, erasing the gains made since the fund launched in April. ETF Database data shows outflows of more than $2.23 billion over the last 30 days, bringing the three-month total to $4.86 billion.

The fund now holds $17.5 billion in assets, down sharply from its all-time high of more than $26 billion.

DRAM has sold off because of the ongoing weakness among memory stocks. Micron (NASDAQ:MU) dropped to $690, down by 45% from its all-time high. Other top memory companies like Samsung Electronics, SK Hynix, and SanDisk have all dropped by over 40% from their peak. 

The stocks have dropped despite their strong revenue and profitability growth. SanDisk said that its revenue jumped by 23% sequentially to $11 billion, while its net income soared to $8 billion during the quarter. 

Micron’s revenue jumped to over $54 billion during the quarter, with its gross margin hitting 86%. Other companies in the fund like Western Digital, SK Hynix, and Samsung Electronics, released strong numbers.

Most importantly, all of them announced strong shareholder returns and raised their forward guidance, a sign that demand remains strong. Micron, for example, has announced a new $35 billion share buyback program starting in December. Samsung announced an $80 billion buyback, while SanDisk repurchased $5 billion worth of shares last quarter.

DRAM’s constituent companies are also highly undervalued using most multiples. SanDisk has a forward price-to-earnings ratio of 3.6, while Micron has 3.9. Also, Western Digital has a multiple of 10. 

AI Bubble Fears are Pushing Memory Stocks Lower

The ongoing DRAM ETF outflows are happening as investors remain concerned about the AI industry. Fears that the AI industry is in a bubble have continued after several warnings by some experienced investors like Ray Dalio and Ken Griffin.

At the same time, there are concerns that the ongoing ramping up of memory production will lead to an oversupply. Top executives, however, believe that these supply issues will become a concern in 2029.

Meanwhile, the US midterm elections, where Democrats won convincingly, means that AI regulation will be key. There are also concerns about data center moratoriums in the US. For example, Gina Hinahosa, the incoming Texas governor, has vowed to issue a moratorium that can have an impact on the industry. Still, some analysts believe that the fears are overblown.

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