Storage chips rebound violently — is this a return to a bull market or a dead cat bounce?

Last night's performance on Wall Street made even the phrase "violent rebound" seem like an understatement.

SK Hynix surged 17.52%, SanDisk jumped 25.99%, Micron rose 18.36%, and Microsoft climbed 15.51%. Even the VIX fear index fell 17.28% in a single day. Just days after the memory chip sector appeared to be bleeding profusely, it staged a dramatic overnight reversal.

A rebound of this magnitude is never driven by a single factor. It's the result of multiple forces converging: South Korea's market rescue, cooling U.S. inflation, Microsoft's earnings, and a short squeeze. But before getting excited, one question must be answered clearly: Is this the beginning of a reversal, or just a textbook "dead cat bounce"?

1. South Korea's Market Rescue: Technical Review of Short-Selling Ban Under Political Pressure

Let's start with the first clue, from the epicenter of this storm — South Korea.

After several consecutive days of sharp declines, the Korea Exchange (KRX) has internally assessed the technical feasibility and system preparation time required for a temporary ban on short-selling, while also reviewing the feasibility of narrowing the current 30% price fluctuation limit. South Korea's Ministry of Economy and Finance also convened an "emergency market conditions review meeting," after which it stated it would maintain the highest level of market alert and activate a cross-departmental 24-hour monitoring mechanism.

This market rescue also carries significant political sensitivity. The South Korean government had previously actively encouraged retail investors to participate in the AI chip stock craze led by Samsung Electronics and SK Hynix. Now that retail investors have suffered massive losses within 48 hours, the authorities are caught in a dilemma — if they do nothing, public sentiment will be unsustainable; if they intervene, they risk interfering with market pricing.

This is precisely why the measures introduced this time appear to carry genuine substance. The expectation of a short-selling ban, combined with discussions on narrowing price limits, can meaningfully constrain short-term selling pressure. For the market, this means at least one thing: the policy bottom has already emerged ahead of the market bottom.

2. Deleveraging Enters Its Late Stage: Leveraged ETF Assets Shrink Nearly 70%

As we mentioned in yesterday's article, the key to the memory chip sector stabilizing is not where prices fall to, but how far South Korea's leverage unwinding has progressed.

Now let's look at how far that unwinding has come.

During this crash, the KOSPI index has successively broken below its 50-day, 100-day, and 200-day moving averages, with the technical picture fully broken. Leveraged ETF assets under management have plunged from over $50 billion at the June peak to approximately $16 billion — a decline of nearly 70%.

This number is critical. While it's hard to say leverage has been fully flushed out, a 70% contraction in leveraged capital means deleveraging has clearly entered its late stage — the most brutal forced-liquidation peak has likely passed, and the remaining selling pressure is more emotional than mechanical.

South Korea's policy backstop, combined with leverage unwinding nearing its end, is the first layer of reason the rebound was able to ignite first in Asian trading.

3. U.S. Resonance: Cooling Inflation + Microsoft's Strongest Single-Day Performance Ever

The second layer of reason comes from the United States.

The U.S. Q2 core PCE inflation data released last night showed cooling, causing short-term rate hike expectations to plummet and macro liquidity expectations to loosen overnight.

Even more impactful was Microsoft. This fiscal Q4 2026 earnings report was nothing short of explosive: revenue of $90 billion, up 18% year-over-year; Azure and other cloud services growth accelerating from 40% in the previous quarter to 43%. CEO Satya Nadella explicitly stated that Azure's full-year revenue "exceeded $100 billion," growing 41% — marking the first time this business has crossed the hundred-billion threshold.

The market voted with real money: Microsoft surged over 15% in a single day, marking the largest single-day market cap increase for a single stock in Wall Street history, and the stock's biggest one-day gain in 18 years. Combined with the end of selling pressure from the liquidation of large AI funds, tech stocks and momentum stocks collectively staged a short-covering rebound.

Why is Microsoft's earnings report so important for the memory chip sector? Because the underlying narrative behind the memory chip crash was concern that the "AI bubble had burst" and that capital expenditure was unsustainable. Microsoft's report directly answered this: demand isn't just holding steady — it's accelerating. With the narrative falsified, short sellers covered their positions, and the gains naturally became exaggerated.

4. A Reality Check: The Latent Risk of Yen Rate Hikes

If the above makes you feel like "the bull market is back," then I'd suggest you calm down before reading this next section.

Japan's inflation has now accelerated for a second consecutive month, and the Bank of Japan is expected to raise rates again in the coming months. According to data from the Ministry of Internal Affairs and Communications, Tokyo's core CPI rose 1.9% year-over-year in July, beating the market expectation of 1.8%; the "core-core CPI" (excluding fresh food and energy) rose 2%, while overall CPI also rose 2%. Takeshi Minami, chief economist at the Norinchukin Research Institute, predicts inflation will remain above 2%.

The market currently widely expects the Bank of Japan to keep rates unchanged at 1% at Friday's meeting, but may signal further hikes ahead.

What does this mean for global markets? It means the cost side of the U.S.-Japan carry trade is rising. The violent turbulence in global markets in August 2024 was triggered precisely by the large-scale unwinding of yen carry trades. If South Korea's leverage unwinding is the "visible line" in this cycle, then Japan's rate hike expectations are the "shadow line" hanging overhead — it won't determine whether a rebound happens, but it will determine how far it can go.

5. What to Watch Next?

Microsoft's earnings answered the question of "can AI capex be sustained," but another question remains to be verified: As the supply cycle advances and China's CXMT (ChangXin Memory Technologies) goes public, can the memory chip industry's high profit margins be maintained?

To gauge the quality of this rebound, here's what to watch:

• Whether memory chip stocks can hold their gains, and whether Korean stocks avoid another surge-then-fade pattern;
• Whether HBM, DRAM, and NAND prices and orders continue to be revised upward;
• And three key time windows — the Future Memory Conference on August 4, SK Hynix's HBM4 volume ramp progress in Q3, and NVIDIA's earnings on August 26.

6. Final Thoughts

Let's pull the whole picture together: The policy bottom has appeared, deleveraging has entered its late stage, and the AI demand narrative has been reconfirmed by Microsoft. However, Japan's rate hike expectations remain unresolved and the memory chip supply cycle remains unverified, which means it's far too early to be shouting "the bull is back."

For investors, the two worst mistakes in this kind of market are: panic-selling at the bottom, and chasing highs during a violent rebound. What truly matters remains discipline — don't go all-in early in a rebound, build positions gradually after confirmation signals appear, and let position management replace price prediction.

This is also the investment philosophy that BIT Exchange has always emphasized. At this juncture, investors may also consider using BIT Exchange's options functionality to hedge their underlying assets, preparing for the upcoming market moves while waiting for the market to provide its answer.

Disclaimer:

This article is a contribution from an external author. The content represents solely the personal views of the author and does not constitute the position, views, or opinions of BIT or its affiliated companies. The information contained herein is for reference only and does not constitute any investment advice, investment solicitation, recommendation of securities or financial products, nor should it be used as a basis for any investment decision. Financial markets involve risks, and the prices of related assets may experience significant volatility. Investors should make independent investment decisions based on their own circumstances and bear the corresponding risks themselves.