Why storage chips keep under sustained pressure? A double hit from the AI compute-demand revaluation and tighter leverage policies

Since July 2026, South Korea’s storage chip sector has gone through a round of deep pullback. Samsung Electronics and SK hynix—two storage giants that together account for more than half of South Korea’s stock market value—have seen their share prices fall sharply from recent record highs within weeks. After the KOSPI index hit a historical closing high of 9,052.42 points on June 15, it has since retraced 24.8%. Behind this adjustment are intertwined factors: the market’s reassessment of the outlook for AI compute demand, concerns about the industry cycle, and the added impact of South Korea’s proposed tightening of leveraged trading policies.

Why the storage chip sector saw a wave of collective selling in the summer of 2026

On July 16, the KOSPI index in South Korea fell 4.4% immediately at the open; by the time of publication, the decline had expanded to nearly 7%, and the Korea Exchange launched a temporary suspension mechanism for the KOSPI index. Samsung Electronics shares were down more than 9%, while SK hynix shares fell nearly 12%. This was not an isolated event. On July 13, SK hynix plunged 15.37% in a single day, setting the biggest single-day drop since listing; Samsung Electronics fell nearly 11%, the KOSPI index closed down 8.95% and fell below the 7,000-point threshold. Compared with the June peak, SK hynix’s share price is down nearly 40% in total.

U.S. storage-related stocks were also not spared. On July 15, SanDisk fell 8.12%, SK hynix’s ADR fell 9%, Western Digital dropped more than 8.7%, and Micron Technology fell 8%. Even though chip equipment maker ASML released strong earnings the same day, showing that market demand for logic chips and DRAM remained robust, it still failed to lift sentiment.

How have expectations for AI compute demand changed this time?

The core of this storage-stock pullback is not a real disappearance of demand, but the market shifting from the “AI infrastructure expansion” phase to the “profit realization and validation” stage. After visiting more than 50 Hong Kong institutional investors, JPMorgan found that roughly 70% of market sentiment currently revolves around one variable—whether future capital expenditures by hyperscale cloud service providers can still be raised significantly.

Previously, the market kept upgrading its expectations for AI data center investment and also revised upward the total addressable market for the storage industry. Most investors expected hyperscale cloud companies’ capital expenditures over the next 3 to 6 months could be further raised to between $1 trillion and $1.5 trillion. But as share prices surged quickly, investors began to worry that sell-side forecasts for future demand may have gotten ahead of hyperscalers’ actual capex plans.

At the same time, DRAM price increases started to slow. After a period of consecutive price hikes, starting from the second quarter of 2026, both year-over-year and quarter-over-quarter DRAM price growth rates began to decelerate, cooling expectations that industry profits would continue to expand rapidly. Samsung Electronics’ profit expectations were also downgraded ahead of its second-quarter earnings report.

Differences also show up in HBM pricing. Most buy-side institutions expected the 2027 average HBM price per GB to double year over year, but JPMorgan is more cautious, forecasting that a year-over-year increase of 25% to 30% in 2027 would be more in line with industry reality. This gap in expectations is itself continuously suppressing valuations for the sector.

How South Korea’s proposed leverage-tightening trading policy amplified market volatility

South Korea’s single-stock leveraged ETF was listed on May 27, and the 2x leveraged products tracking Samsung Electronics and SK hynix attracted a large influx of retail funds. The Korea Capital Market Research Institute estimated that these ETFs generate trading amounts of between 700 billion and 2.1 trillion South Korean won (about $1.4 billion) per day due to rebalancing, creating a concentrated shock to market liquidity around the near-close trading window.

The amplifying effect of leverage is especially significant when the market turns down. Data from the Korea Financial Investment Association shows that over just 10 days from July 1 to July 10, the amount that was forcibly liquidated by brokers after investors failed to top up margin in time totaled 425.8 billion South Korean won (about $284.9 million). It is estimated that between 320,000 and 460,000 retail leveraged accounts were forced to liquidate in full. As account values kept shrinking, margin shortfalls quickly emerged; brokers then executed mass forced selling, further pushing down individual stock prices and in turn forcing more leveraged accounts to hit liquidation thresholds, creating a vicious cycle.

Facing this situation, regulators in South Korea moved quickly. A top-level coordination mechanism known as “F4,” made up of the Ministry of Economy and Finance, the Financial Services Commission, the Bank of Korea, and the Financial Supervisory Service, formally stepped in. On July 14, the Korea Financial Investment Association convened an emergency meeting with CEOs of major brokerages. In principle, participating institutions agreed to raise the minimum margin requirement from 10 million South Korean won (about $6,700) to 50 million South Korean won (about $33,500). President Lee Jae-myung of South Korea has also ordered relevant units to propose measures as soon as possible to strengthen regulation of leveraged ETFs tied to individual stocks.

Has the supply-demand balance for storage chips truly undergone a structural reversal?

Despite the sharp pullback in share prices, multiple analysts believe the tight supply-demand situation for storage chips has not been fundamentally reversed. SK hynix’s CEO projected that the AI-driven structural shortage of storage chips will continue through 2030. UBS expects that the storage chip industry’s total revenue will reach $99.2 billion in 2026 and that this figure will rise to nearly double by 2027, reaching $176 billion. The bank predicts 2026 HBM demand will grow 90% year over year, followed by another 77% increase in 2027.

In its latest report, Nomura said concerns about “compute oversupply” may be overstated, and the storage chip industry still has a long way to go before a downturn cycle. Bank of America also noted that the current summer pullback in AI semiconductors—including storage chip stocks—is a healthy reset rather than a structural change in AI compute demand. The bank expects that global cloud and AI infrastructure capital expenditures will reach $1.5 trillion by 2027.

JPMorgan, meanwhile, believes DRAM supply is still relatively tight, and enterprise SSD demand remains strong, but the near-term trajectory still needs to be validated by earnings reports. The market’s focus has shifted from “how much more the industry can grow” to “how long current profitability levels can actually be sustained.”

What does the volatility in Korean chip stocks mean for the cost structure of crypto miners?

There is a direct resource competition relationship between AI compute demand and crypto compute. High-end chips and memory resources serve both AI data centers and crypto mining. When the AI premium is high enough, chipmakers will prioritize shifting capacity toward AI customers, and the delivery timelines and prices for crypto mining hardware will be adversely affected.

Volatility in storage chip prices directly affects the hardware procurement costs of crypto miners. Products such as HBM and high-end DRAM are core components of AI accelerators; tight supply-demand and pricing changes for these components will be transmitted through the supply chain to the manufacturing cost of crypto mining machines. Currently, the average industry selling price of HBM is about $1.8 per GB. If storage chip prices keep rising due to sustained supply-demand tightness, mining-machine producers’ cost pressure will increase accordingly; conversely, if a sector pullback loosens storage chip prices, miners’ hardware procurement costs could see some relief.

In addition, crypto miners are accelerating their transition toward AI infrastructure service providers. The total value of announced AI/HPC contracts by publicly listed miners has already exceeded $70 billion. VanEck reported that as Bitcoin miners shift toward AI infrastructure, they face a short-term funding gap of about $50 billion, with long-term capital needs of $221 billion. Revaluation and volatility in the storage chip sector will, to a certain extent, affect the financing environment and market confidence for these transitioning miners.

From AI compute re-pricing to leverage deleveraging: what pricing logic is the market switching to?

Overall, the ongoing pressure on South Korea’s storage chip sector is essentially the result of three overlapping logics.

The first is expectation revision. Over the past two years, the market has assigned extremely high growth expectations to AI compute demand, and the share-price gains have already priced in performance for the coming years. When DRAM price hikes slow and uncertainty arises over whether hyperscalers’ capex can continue to exceed expectations, the market inevitably shifts from “telling a story” to “looking at profits.”

The second is leverage deleveraging. Since the single-stock leveraged ETF was listed in South Korea only about a month and a half ago, it has already triggered comprehensive intervention—from financial regulators to the presidential level. The proposed rise in margin thresholds is essentially a proactive compression of leveraged capital in the market, and in the short term it will inevitably intensify selling pressure.

The third is valuation restructuring. Since the June peak, Asia’s storage sector has pulled back about 30% in total, far exceeding the Philadelphia Semiconductor Index’s decline of about 11% over the same period. This outsized drawdown itself indicates that the market’s pricing logic for storage chips is undergoing a profound change—from an “AI infrastructure expansion” infinite narrative to a more cautious assessment of the sustainability of earnings.

Summary

The continued pressure on South Korea’s storage chip sector is the combined result of a re-evaluation of AI compute demand expectations and the tightening of leverage trading policies. Samsung Electronics and SK hynix have seen sharp declines from historical highs, and the KOSPI index frequently triggers circuit breakers, reflecting a deep shift in how the market is pricing the storage chip industry. AI compute demand has not disappeared, but the market is moving from “infinite expectations” back to “limited validation.” Leveraged capital is being actively compressed, and near-term pains are hard to avoid. For crypto miners, storage chip price volatility transmits through two channels—hardware costs and transition financing. Whether this adjustment turns out to be short-term volatility or a trend reversal will be tested in the upcoming earnings season.

Frequently Asked Questions (FAQ)

Q: What are the main reasons the Korean storage chip sector has fallen recently?

A: It is mainly driven by three factors overlapping: a reassessment of market expectations for the growth rate of AI compute demand, cooling profit expectations due to slowing DRAM price increases, and proposed tighter margin requirements for single-stock leveraged ETFs in South Korea, which triggers passive deleveraging of leveraged capital.

Q: How much have the share prices of Samsung Electronics and SK hynix fallen?

A: As of July 16, 2026, Samsung Electronics shares are down more than 9%, and SK hynix shares are down nearly 12%. Compared with the June peak, SK hynix shares have fallen nearly 40% in total. Since the June 15 peak, the KOSPI index has retraced 24.8%.

Q: What exactly does South Korea’s proposed leverage-tightening policy entail?

A: The Korea Financial Investment Association convened an emergency meeting with major brokerages, and participating institutions in principle agreed to raise the minimum margin threshold for single-stock leveraged ETFs from 10 million South Korean won (about $6,700) to 50 million South Korean won (about $33,500). The “F4” top-level coordination mechanism, made up of the Ministry of Economy and Finance, the Financial Services Commission, the Bank of Korea, and the Financial Supervisory Service, has also stepped in.

Q: Has the tight supply-demand situation for storage chips already been reversed?

A: Most institutions believe it has not been reversed. UBS expects total storage chip industry revenue to reach $99.2 billion in 2026 and nearly double to $176 billion in 2027. Nomura believes the market’s concerns about “compute oversupply” are excessive. But the market’s focus has shifted from growth speed to earnings sustainability.

Q: How does volatility in Korean chip stocks affect crypto miners?

A: Mainly through two transmission paths: first, storage chip prices affect miners’ hardware procurement costs; second, crypto miners are accelerating their transition to AI infrastructure, and valuation volatility in the storage chip sector can affect their financing environment and market confidence. The total value of AI/HPC contracts announced by publicly listed miners has already exceeded $70 billion.