Recently, I've been paying attention to the memory sector and found that many people treat it as just another tech stock to buy, but that's not really the case. Memory stocks operate completely differently; they are purely cyclical trading plays. What you want to profit from is the rhythm, not the company itself.

First, let's talk about why the concept stocks of flash memory are so volatile. The entire industry is stuck in a vicious cycle: shortage → manufacturers desperately expand production → oversupply → prices collapse → manufacturers cut back → shortage begins again. This cycle repeats every few years, each time bloodier than the last. Nomura's latest forecast shows that in Q2 this year, DRAM and NAND prices will increase by 51% and 50%, respectively, much higher than previous estimates of 6% and 20%. That’s why memory stocks have been so hot lately.

But the details are very important here. The memory industry chain is divided into three layers, each with completely different profit models. The first layer is the chip manufacturers—companies like Nanya Technology, Winbond, and Macronix. They have the greatest profit flexibility; when prices rise, they surge dramatically, but when prices fall, they suffer heavily. The second layer is companies making control chips and modules—like Phison, Adata, Innodisk, and Silicon Motion. These companies, because they control software integration, have relatively stable profits and less volatility. The third layer consists of international giants—Micron, Samsung, SK Hynix—which dominate the global flash memory and high-bandwidth memory markets.

You ask me how to choose? It depends on your risk tolerance. If you want to profit from price differences, focus on chip manufacturers. If you prefer more stability, choose module makers. If you want to catch the big trend, invest in U.S. tech giants.

On the U.S. side, Micron is the top choice. It’s the only U.S. company with large-scale DRAM and NAND manufacturing capacity. Its HBM capacity has been expanding, memory prices are entering an upcycle, and fundamentals are clearly improving, with room for further gains. SK Hynix ranks second in market value and is the world’s leading HBM supplier. HBM3e and HBM4 are already in mass production, directly benefiting from AI computing demand, with the strongest long-term moat. Kioxia, originally Toshiba Memory, is the world’s fourth-largest NAND manufacturer, and its market cap has jumped from 43rd last year to 10th, a remarkable increase.

In Taiwan stocks, Nanya Technology is the purest DRAM concept stock. AI applications have become a main growth driver, and the upgrade to DDR5 along with rising prices have significantly strengthened its fundamentals. Winbond focuses on niche DRAM and NOR Flash, avoiding the price wars of general-purpose DRAM, resulting in less profit volatility. Phison is the most pure NAND Flash company in Taiwan; currently, NAND supply shortages are close to 20%. AI inference is creating nearly unlimited storage demand, and supply remains tight in the short term. Macronix specializes in NOR Flash and ROM, with advantages in automotive and industrial fields. These embedded storage needs are relatively stable, making them suitable for balancing the cyclical nature of flash memory.

Regarding when to buy, my advice is not to wait for prices to surge before entering. Memory stocks usually start rebounding when prices stop falling and market sentiment is still pessimistic. You should watch for three signals: whether DRAM prices stabilize, whether leading manufacturers start reducing production, and whether inventory days decrease from high levels. Currently, global memory manufacturers’ inventories are at historic lows, with some major companies holding only about four weeks of stock, which explains why prices are easy to rise but hard to fall.

If you want to do swing trading, memory stocks are very suitable due to their high volatility and clear trends. The core logic is to gradually position at the bottom of the cycle and gradually exit when prices rise sharply and market sentiment overheats. Currently, memory prices are still rising, and the tight supply situation is unlikely to ease in the short term. Holding stocks related to manufacturing and modules still has upward potential.

Finally, remember that memory stocks are not stable growth stocks; they are purely cyclical trading assets. You need to judge where the cycle is now, rather than holding onto a company forever. The memory stocks that plunged deeply last cycle have become big winners this round because of the AI supply gap. The essence of memory stocks is: you profit from the rhythm, not the company itself. If you're still unsure, you can practice with a demo account for a while, observe DRAM contract price trends, track major manufacturers’ financial reports and capex movements, and only consider real trading once you have a clearer understanding.