Memory Demand Is Bullish Sign for This Hot ETF

AI’s evolution faces several so-called bottlenecks, including constrained supply for memory semiconductors amid booming demand for those chips. For those who want to focus on domestic names with clear ties to that theme, Micron (MU) usually take the cake. However, there’s international opportunity with the memory chip trade; two South Korean companies — Samsung and SK Hynix — are among the memory semiconductor leaders, along with Micron.

Shares of both South Korean firms are surging on the back of the memory bottleneck. That goes a long way toward explaining why the Direxion Daily South Korea Bull 3X Shares (KORU) is one of this year’s hottest leveraged ETFs. KORU attempts to deliver 300% of the daily returns of the MSCI Korea 25/50 Index, a gauge in which Samsung and SK Hynix are by far the two largest holdings.

To be sure, like any other leveraged ETF, KORU can give and take away in short order. Entering the Thursday, June 11 trading session, the ETF was down more than 24% over the prior week. But as of late June 11, the ETF had made up those losses, and then some. Clearly, it is very much a short-term instrument, not a buy-and-hold investment. Fortunately, for risk-tolerant traders, the memory chip trade has ample tailwinds, indicating plenty of potential opportunities in the back half of this year to make short-term use of the fund.

KORU Is a Demand Story

Fundamentals are important in long-term investing, but they are pertinent in assessing the short-term opportunity set with KORU. Fortunately, there’s good news on that front.

“The pressure is coming from AI infrastructure buildouts. We see servers accounting for 59 percent of DRAM demand by 2028, up from 37 percent in 2023,” noted Shawn Kim, head of Morgan Stanley’s Europe and Asia technology team. “We also see enterprise solid-state drives reaching 65 percent of NAND demand, up from 18 percent. And simply put, data centers are taking a much bigger share of the memory pie.”

Bolstering the case for stocks like Micron, Samsung and SK Hynix and thus KORU, the aforementioned crimped memory supply situation cannot be ameliorated overnight.

“This demand is running into a supply chain that cannot respond quickly. New memory capacity takes years to build, qualify and ramp up. Supply relief is a process, not a switch,” added Kim.

Bottom line: For traders that can handle the volatility, KORU merits a place on their watch lists as the memory trade gains momentum.

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