Amid a sell-off among chipmakers, Wood stated that it is avoiding investments in memory. Why?

In the U.S., the sell-off of chipmaker stocks continues for the second day in a row. Bloomberg noted that manufacturers of hard drive components were hit the hardest: Seagate Technology shares plummeted 7.9% on October 13, while Western Digital shares fell 5.5%. Micron is down about 4%, and SK Hynix shares in the U.S. are falling by the same amount.

The memory chip sector is subject to “severe” cycles of booms and busts, and this problem is likely to worsen as Chinese companies expand their production capacity, said Cathie Wood, founder of ARK Invest, amid the sell-off. She expressed this view at a meeting with investors in Hong Kong, according to Bloomberg. ARK, she said, avoids investing in traditional memory chip manufacturers.

For the second day in a row, investors have continued to sell off shares of semiconductor companies. The Philadelphia Semiconductor Index fell by more than 2% during trading on October 13. The Nasdaq 100 technology index fell by about 0.5%.

Memory chip prices can fall rapidly when supply outpaces demand, Wood said, noting that ARK avoids investing in traditional chip manufacturers.

Although high-bandwidth memory (HBM) remains in short supply, the entry of new Chinese manufacturers into the market threatens to destabilize prices and increase price volatility across the entire sector, she noted.

"The trend [in the memory market] is upward, but the cycles are volatile. If a few more competitors enter the market, especially from China, volatility will increase," Wood believes.

At the same time, she noted that China’s technology sector is less attractive to ARK than similar companies in other countries. This is partly because Beijing’s campaign against “involution”—price wars and excessive competition—has been unable to curb deflation or protect the economy from a deep downturn in the real estate market.

In addition, Wood disagreed with Broadcom CEO Hock Tan’s warning that deals in the artificial intelligence sector had become speculative. She dismissed concerns about a market bubble, expressing confidence that artificial intelligence would deliver massive productivity gains.

South Korea's SK Hynix and Samsung Electronics, along with the U.S.-based Micron Technology, dominate the supply of advanced memory and high-bandwidth memory (HBM). At the same time, state-backed Chinese manufacturers, such as ChangXin Memory Technologies (CXMT), are rapidly ramping up production of dynamic random-access memory (DRAM) to capture market share, Bloomberg notes. Furthermore, on October 12, China’s most valuable company—CXMT— announced progress in developing memory cell architecture, a technology that Micron and SK Hynix, among others, are also working on. Against this backdrop, SK Hynix and Samsung’s stock prices plummeted.

CXMT's announcement also sent shockwaves through the semiconductor sector in the U.S. and Europe. The sell-off in chipmakers' stocks, which began on October 12 in the U.S. market, spread to other regions.

This article was AI-translated and verified by a human editor