Micron Technology, SanDisk and SK Hynix stocks continued to fall on Thursday as concerns about Chinese memory-chip competition and a broader artificial intelligence sell-off weighed on the sector.
Analysts see potential support from shareholder returns, but warn that a recovery could be harder to achieve than during previous market corrections.
Micron shares MU fell as much as 4.4% to $873.66 in early trading before recovering most of their losses. The stock was recently down around 0.6%.
SanDisk shares dropped 3.5%, while SK Hynix’s US shares fell 3% after the South Korean shares fell 11%. Samsung Electronics also declined 9.5%.
The sell-off began earlier in the week after reports that China’s ChangXin Memory Technologies (CXMT) was developing a new memory chip.
Concerns about elevated AI valuations, higher interest rates and the sustainability of technology companies’ capital spending have added to the pressure.
Analysts see limits to China’s threat as memory stocks fall
UBS analyst Nicolas Gaudois believes concerns about CXMT’s new technology may be premature.
The company’s 4F-square design, known as 4F2, is likely to remain a sample product this year, with further development needed to improve its efficiency and performance.
Jefferies analyst Edison Lee also expressed caution about the potential impact on global memory markets, citing uncertainty around CXMT’s production yields and capacity, as well as equipment constraints.
The availability of advanced Chinese memory chips would not necessarily translate into immediate competition for US manufacturers.
US companies may face restrictions on purchasing CXMT-produced memory, while the Chinese company prioritises domestic customers.
However, the longer-term concern remains that an increase in Chinese supply could undermine the elevated memory prices currently benefiting Micron and its peers.
The broader AI sell-off is adding to the pressure. JP Morgan’s global strategy team does not expect the current correction to recover as quickly as the downturn in July, when AI stocks rebounded relatively swiftly.
Strategist Nikolaos Panigirtzoglou highlighted several factors that could make a recovery more difficult, including weaker dip-buying activity, reduced corporate buybacks, limited short interest and increased exposure through leveraged exchange-traded funds.
The Philadelphia Semiconductor Index ETF has fallen around 12% over seven sessions.
Micron buybacks could provide a catalyst for recovery
Shareholder returns have emerged as a potential catalyst for memory stocks.
Gaudois noted that memory shares had fallen 19% from their September peak, bringing them close to their July lows, and argued that the decline should encourage companies to increase shareholder returns.
JP Morgan analysts said a survey of more than 100 investors in Asia found broad support for immediate corporate action by large-cap Asian memory manufacturers to prevent further declines in their valuation multiples.
Micron’s ability to respond is currently constrained by conditions attached to funding it received under the US CHIPS Act in 2024.
Those restrictions are expected to be lifted on December 9. The company has also recently increased its total share-repurchase authorisation to more than $35 billion.
UBS analyst Timothy Arcuri has suggested that Micron could initially repurchase around $20 billion worth of shares per quarter, potentially increasing the amount to approximately $50 billion quarterly towards the end of fiscal 2027 in September next year.
The scale and timing of any buybacks remain uncertain, but shareholder returns could offer investors another reason to reconsider the stocks after their recent declines.
AI spending concerns could delay a broader rebound
The outlook for a sustained recovery remains uncertain because the factors driving the sell-off extend beyond Chinese competition.
Investors are reassessing the growth prospects of AI infrastructure companies amid higher interest rates and concerns about the ability of companies such as Anthropic and OpenAI to achieve profitability.
JP Morgan also noted that leveraged memory ETFs have increased their assets under management relative to the market capitalisation of the underlying stocks.
This can amplify price movements when markets decline.
Meanwhile, SK Hynix is seeking US approval to export additional chipmaking equipment to China, Reuters reported, citing people familiar with the matter.
Its US unit, Solidigm, wants to install equipment for NAND flash memory production at an existing facility in Dalian, China.
The company is making plans for a new US NAND factory contingent on securing the export licence, according to the report.
Expanded production in China would help Solidigm finance the US facility.
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