Google Unveils Breakthrough in AI Memory Technology, Sparking Concerns Over Chip Industry Disparities

Artificial Intelligence Trade Shows Split in Memory-Chip Stocks

A two-day selloff in memory-chip stocks is revealing a divide in the artificial intelligence trade, as Google touts a breakthrough that analysts say may curb demand for certain types of storage while leaving others largely unscathed.

Flash Memory Stocks Tumble Losses extended for the makers of flash memory — longer-term storage used to run AI — including Kioxia Holdings Corp., which have soared in past months. Meanwhile, leaders in high-bandwidth memory used in Nvidia Corp. AI accelerators stabilized, with Samsung Electronics Co. shares erasing all their losses and SK Hynix Inc. close to doing the same.

Google's TurboQuant Technique Presents a Threat The market is beginning to realize that Google's "TurboQuant" technique, which makes operating AI more efficient, poses more of a threat to the first group. By shrinking memory usage and data movement, TurboQuant significantly improves inference efficiency. However, it does not reduce demand for core memory like HBM.

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Investor Sentiment Shifts Investors in past months piled into the makers of flash and storage products on the belief that demand would skyrocket as artificial intelligence goes mainstream. Sandisk shares were up more than 1,000% since the end of August, while Japan's Kioxia had gained over 600%. They soared past Samsung, SK Hynix, and Micron Technology Inc., the traditional leaders of the memory sector that became early darlings of the AI trade.

Industry-Wide Selloff The flash memory firms are taking the brunt of an industry-wide selloff that began this week when investors cottoned on to Google's breakthrough. The US company said the algorithm can cut the amount of memory required to run a specific aspect of large language models by at least a factor of six, helping reduce the overall cost of artificial intelligence.

Long-Term Effects Given the need to store model weights in graphics processing unit memory, high-bandwidth memory demand and DRAM produced by Micron will likely be unaffected, said Bloomberg Intelligence analyst Jake Silverman. NAND demand will face deeper long-term effects.

Market Outlook Tech stocks have broadly come under the microscope after big runups on the AI boom of the post-ChatGPT years. With inflation worries driven by the Iran war spurring caution over highly valued stocks, investors are taking profits on daily headlines.

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