Ark Invest CEO Cathie Wood said she’s avoiding memory-dependent artificial intelligence chip stocks in favor of companies like Cerebras Systems Inc. (NASDAQ:CBRS) and Groq, calling the memory shortage driving up prices a warning sign rather than a reason to invest.
High Prices Are ‘Not the Normal State’
Wood, during an appearance on ‘The Insightful Investor’ podcast hosted by Evoke’s Alex Shahid, explained why Ark doesn’t own memory stocks, viewing high-bandwidth memory as the most cyclical, commoditized part of the semiconductor stack.
“It is the most cyclical part of a semiconductor food chain, the most commoditized,” Wood said, pointing to Cerebras and Groq, both held in Ark’s venture fund, as companies building AI chips that “do not require high bandwidth memory.”
Though Wood did not name specific companies, Samsung Electronics Co. Ltd. (OTC:SSNLF), SK Hynix Inc. (NASDAQ:SKHY), and Micron Technology Inc. (NASDAQ:MU) are the world’s largest DRAM manufacturers, together controlling roughly 90% of global production.
She said prices tripling, quadrupling, or rising tenfold are “not the normal state” and should be viewed as a negative rather than a positive.
Wood compared it to Tesla Inc. (NASDAQ:TSLA) engineering cobalt out of its batteries to avoid a supply chain bottleneck, saying the chip industry is now “engineering out the need for high bandwidth memory.”
Ark’s Trades Reflect the Same Thesis
Ark funds sold $1.8 million of Advanced Micro Devices, Inc. (NASDAQ:AMD) shares on Tuesday, adding to $13.1 million sold Monday, while buying roughly $7.7 million worth of Cerebras stock.
The Memory Shortage Wood Is Betting Against
J.P. Morgan estimates DRAM prices could rise more than 400% from the start of 2024 through the end of 2026, a dynamic the bank calls “chipflation” that’s already pushing up prices on everyday electronics.
SK Hynix’s parent company, SK Group Chairman Chey Tae-won, called current memory prices “abnormally high,” and said the industry should prioritize expanding supply over maximizing profits.
While Samsung, SK Hynix, and Micron are all expanding production, meaningful supply relief isn’t expected until 2028 at the earliest, according to Counterpoint Research Director MS Hwang.
In June, Micron CEO Sanjay Mehrotra called memory “a strategic asset” in the AI era, and the company has signed 16 long-term customer agreements representing roughly $100 billion in cumulative revenue through 2030.
Price Action: Micron fell 7.02% on Tuesday to close at $940.76 and dropped 0.88% further in extended trading.
Benzinga edge rankings indicate Micron’s stock has a Momentum score in the 99th percentile and a Growth score in the 92nd percentile.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Mentor57 / Shutterstock
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