DRAM ETF Issuers: The "Big Three" Market Caps Exceed Trillion Dollars, the AI Era for Memory Chips Has Only Just Begun

Original Authors: Dave Mazza, Thomas DiFazio

Original Translation: TechFlow

Guide: The combined market capitalization of the world's top three memory chip manufacturers has surpassed $1 trillion, prompting Morningstar to remind investors not to overlook fundamentals. Roundhill Investments (issuer of the DRAM ETF) counters point by point: AI infrastructure has reshaped the memory industry's supply-demand structure, manufacturing barriers in HBM keep new entrants out, and the projected combined profits of the three giants by 2027 are estimated at $704 billion. It's important to note that the authors manage the DRAM ETF, naturally holding a bullish stance.

The world's three largest memory chip manufacturers—Samsung Electronics (005930 KS), SK Hynix (000660 KS), and Micron Technology (MU)—have all surpassed a $1 trillion market cap, joining an extremely exclusive club. However, this milestone has also attracted scrutiny.

Morningstar recently published a blog post cautioning memory ETF investors not to ignore fundamentals, raising several pointed questions:

• Historical experience warrants caution: The memory industry has repeatedly experienced boom-and-bust cycles, and investors may be overlooking this history.
• Memory companies lack a moat: Memory is essentially a commodity business. New capacity can always enter the market, eroding pricing power, leaving companies without true barriers to protect profit margins.
• The rally may be momentum-driven, not fundamental-driven: The enthusiasm surrounding memory stocks likely reflects excitement about AI rather than a sober analysis of earnings, margins, and supply-demand dynamics.
• Valuations have surged: Memory stocks have seen massive gains, and prices may have run ahead of fundamentals.

Figure: Overview of the Memory Chip Industry

Roundhill's position is: This time is different. To understand the future of the memory industry, we must first look back at its past.

History Is Indeed Cautionary, But Is History Still Relevant?

The boom-and-bust cycle of memory chips is a fact. The most classic round occurred in the mid-1990s. In August 1995, Microsoft released Windows 95, transforming PCs from enterprise tools to consumer products. DRAM capacity per computer quadrupled from 1-2 MB to 4-8 MB. Manufacturers, caught off guard by the sudden surge in demand, frantically built factories to expand production, ultimately leading to oversupply and a price collapse.

A similar story played out in the mid-2010s. When Apple released the iPhone 7, it upgraded the base storage from 16GB to 32GB—a seemingly small change, but the impact at scale caused a massive demand spike. Manufacturers invested heavily again, followed by overcapacity and falling prices.

These cycles share a common pattern: Technological breakthrough → Demand surge → Manufacturer expansion → Oversupply → Price collapse.

The question is: Is this pattern still applicable today?

The memory chip industry has undergone structural changes. Memory demand is no longer tied to the upgrade cycles of consumer electronics but to the expansion of AI infrastructure computing power. The scale of this market far exceeds a smartphone upgrade wave, offering much greater growth potential.

DRAM and NAND prices have increased more than fivefold since January 2024. Hyperscalers have begun demanding long-term supply agreements to lock in bandwidth. Historically, long-term supply agreements in the memory industry were loose frameworks that changed with market conditions. But that model has changed. SK Hynix stated in its January 2026 earnings call that current agreements reflect "strong mutual commitments" between customers and suppliers, due to the high capital intensity of advanced memory manufacturing. Micron has also reported similar long-term agreement conditions.

Figure: DRAM and NAND Price Trends

The Moat of Memory Chips: Manufacturing Complexity

Not all memory chips are the same. The memory driving today's AI systems is called High Bandwidth Memory (HBM), which is entirely different from the memory in phones and computers. HBM is specifically designed for AI workloads and has extremely demanding manufacturing conditions.

According to Goldman Sachs, SK Hynix, Samsung, and Micron control virtually all of the global HBM supply. This industry, consolidated over decades, has accumulated manufacturing experience that cannot be replicated overnight. Manufacturing complexity itself is the moat, and it is precisely why these three manufacturers have reached where they are today.

Figure: Global HBM Market Share Distribution

This differs entirely from the logic of old cycles. Previously, it was demand rises → new capacity enters → prices crash. Now, the bottleneck isn't capital or willingness but technological capability. SK Hynix currently controls about 58% of the global HBM supply and announced on June 2nd plans to double wafer capacity over the next five years, while warning that supply shortages will persist until 2030. Building a new factory takes at least three years; for a new location, it takes over five years.

Furthermore, ASML—the world's sole manufacturer of extreme ultraviolet (EUV) lithography machines, essential for producing advanced memory chips—entered 2026 with a backlog order of €38.8 billion, exceeding its projected full-year sales. The delivery cycle for a single EUV machine exceeds 12 months. This bottleneck cannot be resolved in the short term.

Fundamentals: Memory Manufacturers Poised to Join the World's Most Profitable Companies

The earnings, revenue, and margin expectations for Samsung, SK Hynix, and Micron reflect the secular wave of AI adoption. Bloomberg consensus estimates suggest that by 2027, these three companies will rank among the world's ten most profitable companies.

Figure: Predicted Ranking of World's Most Profitable Companies in 2027 (Bloomberg Consensus)

The combined bottom-line profit for the three companies in 2027 is projected to be $704 billion, with total revenue exceeding $1 trillion.

Figure: Revenue Forecast for the Three Major Memory Manufacturers

Figure: Profit Forecast for the Three Major Memory Manufacturers

In terms of profit margins, the gross operating margins of Samsung, SK Hynix, and Micron have reached historical records, surpassing the previous highs of 2018.

Figure: Historical Gross Margin Trends for the Three Major Memory Manufacturers

These figures are unprecedented in the history of the memory industry. Even if growth slows, as generative AI continues to integrate into the global economy, the memory industry is likely to stabilize at an unprecedentedly high baseline.

Value Reassessment in a New Profitability Era

Historic stock price performance coupled with significant upward revisions in fundamentals indicates that the industry is undergoing a major revaluation driven by earnings growth and margin expansion.

SK Hynix and Samsung are two typical cases. For the past decade, the NTM (Next Twelve Months) price-to-book (P/B) ratios of both stocks fluctuated within a certain range, constrained by the cyclical profitability of the memory industry. But this ceiling may no longer apply. The expected ROE (Return on Equity) for both companies has surged to levels never seen before in the memory industry's history. The valuation framework investors have long used to judge these stocks needs to be re-evaluated.

Figure: SK Hynix NTM P/B Ratio and ROE Trends

Figure: Samsung Electronics NTM P/B Ratio and ROE Trends

Despite the astonishing recent share price gains, the median NTM P/E ratio of the DRAM ETF holdings is only 8.37x, an attractive valuation compared to the broader tech sector. Meanwhile, the median year-over-year EPS growth for the current fiscal year in the portfolio is 632%. Calling memory stocks overvalued essentially means applying old data to a new industry. In Roundhill's view, the gap between historical valuation conventions and current fundamental performance represents the opportunity.

Figure: DRAM ETF Holdings Valuation and Earnings Growth Snapshot

Conclusion: Why Roundhill Isn't Worried

Skepticism towards a stock price surge is reasonable; fundamentals always matter in the long run. But in this case, fundamentals are precisely why memory stocks are rising.

The old cycle was characterized by: Demand exploding without a ceiling, manufacturers over-expanding capacity, and prices inevitably crashing. Today's situation is structurally different: Manufacturing barriers limit new entrants, industry leaders themselves state supply shortages will persist until 2030, and the profit cycle is just beginning to reflect the scale of AI infrastructure buildout.

Roundhill believes the market is currently pricing not a bubble, but an industry that has struggled through boom-and-bust for decades entering a new era.

⚠️ Editor's Note: The original authors, Dave Mazza and Thomas DiFazio, are members of Roundhill Investments, the issuer and manager of the DRAM ETF (Roundhill Memory ETF). The article naturally holds a bullish stance. Readers should consider third-party perspectives like Morningstar for a comprehensive assessment. The ETF risk disclosures and legal notices at the end of the original text have been omitted. Please refer to the original link for full information.