Tightened leverage policy expectations and a reassessment of AI demand converge, keeping South Korea’s storage sector under continued pressure

BlockBeats, July 16: South Korea’s listed storage chip sector has recently continued to weaken. The main reasons for the stock price pullback are the market’s reassessment of the outlook for AI computing demand, concerns about the industry cycle, and South Korea preparing to tighten leverage trading policies.

Industry insiders said the storage chip industry has long shown clear cyclical characteristics: whenever the industry upcycle rises, manufacturers often expand capacity in tandem, and then the newly added capacity is released in a concentrated manner, causing prices to fall sharply and the industry as a whole to fall into losses. After capital expenditures contract and supply-demand is rebalanced, the industry then enters a new round of upcycle.

News that Meta plans to lease idle computing power resources, among other items, has triggered concerns in the market about potential overspending in AI infrastructure investment. The sentiment quickly spread to global storage chip stocks. Over the past few weeks, shares of major players such as SanDisk, Micron Technology, Seagate Technology, and Western Digital have all fallen by more than 20% in total, dragging down the performance of related South Korean storage chip stocks as well. Meanwhile, U.S. President Trump recently said that Micron plans to invest $250 billion in the United States to expand local storage chip manufacturing to strengthen U.S. supply chain security.

In addition, risk appetite in the South Korean market has also been affected by policy factors. The Bank of Korea announced today a rate hike of 25 basis points to 2.75%, the first hike since January 2023, matching market expectations. Meanwhile, the Korea Financial Investment Association said that local large asset management institutions are discussing investor protection measures for leverage ETFs on individual stocks, including raising minimum margin requirements and optimizing rebalancing mechanisms. The margin requirement for South Korea’s leveraged chip ETFs may be increased to five times the current level, further intensifying the market’s cautious sentiment about funding conditions for the chip sector.