DRAM ETF Assets Hit $21 Billion AUM, But Key Risks May Lead To A Reversal
Micron Technology, Inc. MU | 0.00 | |
Apple Inc. AAPL | 0.00 | |
Western Digital Corporation WDC | 0.00 | |
Sandisk Corporation SNDK | 0.00 | |
Roundhill Memory ETF DRAM | 0.00 |
The Roundhill Memory ETF (CBOE: DRAM) continued its strong rally last week and reached a record high of $77.63, up by 173% from its lowest point in April, when it was launched.
It has recorded inflows every week since its launch, with assets under management reaching $21 billion. This makes it the fastest ETF ever to reach that milestone.
DRAM is Benefiting From The Soaring Memory Chips Demand
DRAM ETF has done well because of the ongoing memory demand and supply shortage, which has pushed its prices higher. Just last week, Apple’s (NASDAQ:AAPL) Tim Cook warned that iPhone prices will rise this year because of the ongoing memory price surge.
Top companies in the fund have become some of the fastest-growing this year. For example, Micron (NASDAQ:MU), the biggest memory company in the United States, will release its quarterly results on Wednesday. Analysts expect that its revenue surged by 276% to over $35 billion. Its annual revenue is expected to come in at $113.26 billion, up by 203% YoY.
Samsung Electronics and SK Hynix, the other two biggest names in the industry, are also doing well. In its recent earnings report, Samsung said that its revenue jumped to $90 billion in the first quarter, with its operating profit rising by 750% from a year earlier.
SK Hynix, on the other hand, said that its revenue nearly tripled to $35.55 billion, while its operating profit rose fivefold year-on-year. It reported an operating profit margin of 72%. These three companies have now entered the exclusive $1 trillion club.
DRAM Stock Faces Some Key Risks Ahead
The Roundhill Memory ETF faces some risks ahead. One of them comes this week when Micron publishes its financial results. It is widely expected that the company will publish strong numbers, with its revenue and profitability growth soaring.
The company is also expected to issue strong forward revenue guidance as the AI supercycle continues. However, there is a risk that the guidance may fall short of analysts’ expectations. If that occurs, Micron’s stock could pull back, which may also weigh on the broader ETF.
A good example of this is what happened when Broadcom published its earnings recently. While its numbers were strong, the stock retreated sharply and dragged the broader market.
The other risk is that Micron, Samsung, and SK Hynix account for 72% of the entire fund. The other top names in the fund are Japan’s Kioxia, Sandisk (NASDAQ:SNDK), and Western Digital (NASDAQ:WDC). As such, a major issue affecting one of the three top names would have a big impact on the fund.
Technicals also show that the Relative Strength Index is nearing the overbought level of 70. It also remains above the 50-day moving average. As such, there is a risk that the stock will retreat amid profit-taking among investors.
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