Memory Chip Market Plunges Amid Google's Advances in Storage Technology

Memory Chip Stocks Decline Amid Google's AI Efficiency Breakthrough

On Thursday, SK Hynix Inc. and Samsung Electronics Co., South Korean leaders in the market, fell more than 6% and about 5% in Seoul, respectively. In the US, Micron Technology Inc., Western Digital Corp., and Sandisk Corp. slid more than 2% in pre-market trading.

The decline follows Alphabet Inc.'s Google publicizing research on a new technology called TurboQuant, which could allow more efficient use of storage needed for artificial intelligence development. TurboQuant can cut the amount of memory required to run large language models by at least a factor of six, reducing the overall cost of training artificial intelligence.

Investors had been driving up the prices of memory chips due to the rapid development of AI infrastructure and the subsequent increase in demand. However, with Google's new technology, there are concerns that the shortages that have lifted prices of smartphones and consumer electronics may be alleviated.

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Morgan Stanley analyst Shawn Kim noted that the impact on the industry should be more positive because it affects a critical bottleneck. The technology improves the efficiency of the key value cache used for inference, or running AI models.

JPMorgan Chase & Co. and Citigroup Inc. also cited the Jevons Paradox, a concept from an English economist about coal production stating that the more efficient technology becomes, the more demand will rise. This theory suggests that the increased efficiency of TurboQuant may actually lead to higher demand for memory chips.

The development may make "little difference to demand given the extreme supply constraints," according to Ortus Advisors analyst Andrew Jackson.