AI Memory Play DRAM ETF Is Up 90% Since Launch: A Huge Korea Risk Unraveled It Today

• DRAM dropped 5% in the overnight session heading into Tuesday.
• Samsung Electronics and HK Hynix shares in Seoul dropped sharply and partially recovered after a policy official’s comments created speculation that South Korea might be looking at taxing AI-linked profits.
• Stocktwits sentiment for DRAM has remained ‘extremely bullish’ since the start of last week.

Just over a month after its launch, the Roundhill Memory ETF (DRAM) has already become a retail favorite. The first dedicated fund tracking memory chip stocks has gained 90% since April 2 and has added roughly 1,700% more watchers on Stocktwits during this period.

However, DRAM dropped 5% in overnight trading heading into Tuesday, tracking declines in South Korean chip majors Samsung Electronics and SK Hynix – and that’s a key risk for ETF investors to keep an eye on.

DRAM has an outsized exposure to the two companies. Samsung and SK Hynix account for 24.99% and 24.22% of the fund’s holdings, according to its factsheet. The third-largest is Micron Technology, accounting for 23.83% of the total.

Arguably, developments on the other side of the world, business or geopolitical, would have a large impact on DRAM’s performance. And such was the case on Tuesday.

South Korean Official’s Remarks Stir Confusion

Late Monday local time, South Korean presidential policy chief Kim Yong-beom’s remarks on Facebook, in which he discussed how chip companies are generating enormous profits and fueling record tax revenue for the government, triggered confusion over whether the government plans to impose an additional tax on AI-linked profits.

“The nation should pay dividends,” he said. South Korea’s benchmark Kospi index tumbled as much as 5.1% on Tuesday before trimming declines after Kim clarified that he planned to use “excess tax revenue” created by the AI boom, rather than impose a fresh windfall levy on corporate earnings. Shares of Samsung and SK Hynix initially fell sharply, though both later recovered a large portion of those losses.

To be sure, Kim outlined a bullish stance on the memory chip sector. “The possibility of a memory-centered super cycle continuing until at least 2027 is a picture that global markets, industries, and investment banks are beginning to imagine,” he said.

The AI-linked optimism is driving sharp gains, particularly in the tech-heavy East Asian markets, such as Taiwan and South Korea, with the latter’s Kospi hitting a fresh record on Monday. Over the past 12 months, gains in the iShares MSCI South Korea ETF (EWY) and the iShares MSCI Taiwan ETF (EWT) have far surpassed those in SPDR S&P 500 ETF (SPY) and Invesco QQQ Trust (QQQ). 

Potential Strike At Samsung Factories 

Meanwhile, at Samsung, last-ditch talks between the company and its labor unions have yet to yield a resolution as they enter their second day, contributing to a drop in Samsung's stock. In essence, the dispute centers around the union’s demand that Samsung uncap performance payouts and set them at 15% of operating profit.

Samsung workers have threatened to launch an 18-day strike beginning May 21 if negotiations collapse, an event that could impact global chip supply.

Retail’s View On DRAM

Since the two companies account for roughly half of the DRAM portfolio, the move does not reflect the performance of U.S. memory companies. On Stocktwits, the retail sentiment for DRAM remained ‘extremely bullish,’ unchanged since the start of last week.
 

Traders are tracking the risks. “Samsung negotiations with workers union failed 2nd day in a row. Strike is planned starting May 18 although both sides could reach a settlement before then. The stock fell 2% on the news. DRAM volatility is probably reacting to the possibility of a strike,” said a trader.

Another wrote: the drop in DRAM happened “because its 25/25 samsung/sk and if you hadn’t been keeping up with kospi (south korean stock index) it has gone parabolic last couple of weeks. And now its crashing I’d say at least a 20% correction there. DRAM at $40.”

Samsung and SK Hynix shares were down 1.4% and 1%, respectively, in Seoul just as the trading day was drawing to a close. Shares of Micron dropped 3% in the U.S. overnight session heading into Tuesday. MU stock is up more than 50% already in May.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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