Memory stocks fall on China competition and 2029 oversupply fears

Memory chip equities have declined sharply this week as investors weigh the competitive threat from China against speculation about a future market glut. SK Hynix shares fell 26%, Samsung dropped 22% and Micron declined approximately 11% over the last five days, according to market data cited in the source.

The sell-off began after ChangXin Memory Technologies, or CXMT, announced plans to launch a server memory product using a new architecture. The design promises higher storage density, which raised concerns that CXMT could capture global market share from incumbents Samsung, SK Hynix and Micron. However, analysts questioned whether CXMT can scale production of such advanced technology. Ben Barringer, global head of technology research at Quilter Cheviot, told CNBC's "Squawk Box Europe" that yield rates on new architectures are a critical factor, noting that low yields would result in significant waste. Kevin Cassidy, a senior research analyst at Rosenblatt Securities, added that he does not believe CXMT's developments will shift the supply-demand equation.

Further pressure came from an opinion column in South Korea's Maeil Business Newspaper. The writer cited Professor Hwang of Seoul National University and Ahn Ki-hyun, executive director of the Korea Semiconductor Industry Association, who expect a flood of new supply to turn the memory market into a red ocean in 2029. The column suggested that by 2030, the current supercycle could end, leading to an industry downturn. Elon Musk, CEO of SpaceX and Tesla, responded to the article on X, stating that China will be making a lot of RAM in 2028.

Random access memory is produced by SK Hynix, Samsung, Micron and CXMT. While an oversupply in 2029 would likely compress prices and margins, no other analysts have echoed this specific forecast. Historically, memory prices surge when demand outstrips supply and fall as manufacturers ramp up production. Currently, AI demand has tightened supply and driven unprecedented price increases, benefiting the major memory makers. Investors are now assessing whether this boom-and-bust cycle is undergoing a fundamental change.

Major manufacturers are expanding capacity, but factory construction typically takes three to five years. Many analysts forecast the shortage will persist until 2028. Counterpoint Research expects DRAM prices to fall around 23% in 2028 compared with 2027, though prices would still be up approximately 230% compared to 2025. Jeongku Choi, senior research analyst at Counterpoint Research, told CNBC that the market has entered a New Normal era where down cycles will differ from previous ones. He noted that suppliers and buyers are entering three- to five-year long-term agreements with upfront payments and price limits, which should mitigate sharp declines during downturns.