DRAM ETF Issuers: The Big Three’s Market Cap Breaks Trillion, the AI Era for Memory Chips Has Just Begun

Original Authors: Dave Mazza, Thomas DiFazio

Original Translation: Deep Tide TechFlow

Introduction: The market capitalizations of the world's three largest memory chip manufacturers have all exceeded $1 trillion. Morningstar subsequently published an article reminding investors not to overlook the fundamentals. Roundhill Investments (issuer of the DRAM ETF) responded point by point: AI infrastructure has reshaped the supply-demand structure of the memory industry; the manufacturing barriers of HBM prevent new entrants entirely; and the combined expected profits of the three giants for 2027 will reach $704 billion. It should be noted 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 $1 trillion in market capitalization, joining an extremely exclusive club. However, this milestone has also invited scrutiny.

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

• History serves as a cautionary tale: The memory industry has repeatedly experienced boom-and-bust cycles, and investors may be ignoring this history.
• Memory companies have no moat: Memory is essentially a commodity business. New production capacity can always enter the market, eroding pricing power. These companies lack real barriers to protect profit margins.
• The rally may be momentum-driven, not fundamental-driven: The enthusiasm surrounding memory stocks reflects excitement about AI rather than a sober analysis of earnings, margins, and supply-demand dynamics.
• Valuations have soared: Memory stocks have seen massive gains, and prices may have run ahead of fundamentals.

Figure: Overview of the Memory Chip Industry

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

History Is Indeed a Cautionary Tale, But Is History Still Valid?

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 the personal computer from an enterprise-exclusive device into a consumer product. DRAM capacity per computer quadrupled from 1-2 megabits to 4-8 megabits. Manufacturers, caught off guard by the sudden surge in demand, frantically built factories to expand capacity, ultimately leading to oversupply and a price crash.

A similar story repeated in the mid-2010s. When Apple released the iPhone 7, it upgraded the base storage from 16GB to 32GB. This seemed like a minor change, but when scaled, it caused a surge in demand. Manufacturers again invested heavily, followed by overcapacity and falling prices.

These cycles share a common pattern: Technological breakthrough → Demand surge → Manufacturers expand capacity → Oversupply → Price collapse.

The question is: Does this pattern still apply today?

The memory chip industry has undergone structural changes. Memory demand is no longer tied to the replacement cycle of consumer electronics but to the expansion of AI infrastructure's computing power. The scale of this market far exceeds that of a single smartphone upgrade wave, and its growth potential is much larger.

DRAM and NAND prices have more than quintupled since January 2024. Hyperscalers are beginning to demand 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 this model has changed. On SK Hynix's January 2026 earnings call, the company stated that current agreements reflect "strong reciprocal 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 a completely different product from the memory used in phones and computers. HBM is specifically designed for AI workloads, and its manufacturing conditions are extremely demanding.

Goldman Sachs data shows that SK Hynix, Samsung, and Micron control nearly all of the global HBM supply. This industry has consolidated over decades, and the accumulated manufacturing expertise cannot be replicated overnight. Manufacturing complexity itself is the moat, and it is precisely the reason these three manufacturers have reached their current position.

Figure: Global HBM Market Share Distribution

This logic is entirely different from the old cycle. In the past, it was: Demand rises → New capacity enters → Prices crash. The current bottleneck is not capital or willingness but technological capability. SK Hynix currently controls approximately 58% of the global HBM supply. On June 2, it announced plans to double wafer production capacity over the next five years, while simultaneously warning that supply shortages will persist until 2030. Building a new factory takes at least three years; if it's a greenfield site, it takes more than five years.

Furthermore, ASML—the world's sole manufacturer of Extreme Ultraviolet (EUV) lithography machines, essential for producing cutting-edge memory chips—entered 2026 with a backlog of orders amounting to €38.8 billion, exceeding its expected 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 a secular wave of AI adoption. Bloomberg consensus estimates indicate that by 2027, these three companies will rank among the ten most profitable companies in the world.

Figure: Forecast of the World's Most Profitable Companies in 2027 (Bloomberg Consensus Estimates)

The combined bottom-line profit of the three companies for 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 operating gross 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, the memory industry is expected to plateau at an unprecedentedly high baseline, given the continued integration of generative AI into the global economy.

Revaluation in a New Era of Earnings

The historic stock performance coupled with a significant upward revision of fundamentals indicates that the industry is undergoing a major revaluation driven by earnings growth and margin expansion.

SK Hynix and Samsung are two prime examples. For nearly a decade, the NTM (Next Twelve Months) Price-to-Book (P/B) ratios of these two stocks fluctuated within a certain range, constrained by the profit characteristics of the memory industry's boom-and-bust cycles. However, this ceiling may no longer be applicable. The expected Return on Equity (ROE) for both companies has surged to levels never seen before in the history of the memory industry. The valuation frameworks investors have long used to judge these stocks need to be reconsidered.

Figure: SK Hynix NTM P/B and ROE Trends

Figure: Samsung Electronics NTM P/B and ROE Trends

Despite the recent astonishing stock price gains, the median NTM P/E ratio of the DRAM ETF holdings is only 8.37x, making the valuation attractive compared to the broader technology sector. Meanwhile, the median year-over-year Earnings Per Share (EPS) growth for the current fiscal year within the portfolio is 632%. Saying memory stocks are 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 Holding Valuations and Earnings Growth Overview

Conclusion: Why Roundhill Isn't Worried

Skepticism towards soaring stock prices is reasonable, and fundamentals always matter in the long run. But in this case, fundamentals are precisely the reason behind the rise of memory stocks.

The old cycle was characterized by: a demand explosion with no cap, manufacturers over-expanding capacity, and an inevitable price crash. Today's situation is structurally different: manufacturing barriers limit new entrants, industry leaders themselves state that supply shortages will persist until 2030, and the earnings cycle is only just beginning to reflect the scale of AI infrastructure buildout.

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

⚠️ Editor's Note: The authors of this article, Dave Mazza and Thomas DiFazio, are members of Roundhill Investments, which issues and manages the DRAM ETF (Roundhill Memory ETF). The article naturally holds a bullish stance. Readers should consider third-party perspectives such as Morningstar's for a comprehensive judgment. The ETF risk disclosures and legal statements at the end of the original text have been omitted. For complete information, please refer to the original article link.