DRAM: This ETF has a major SK Hynix, Micron Technology, and Samsung problem

The red-hot Roundhill Memory ETF (DRAM) is firing on all cylinders amid the rising demand for its constituent companies. It jumped to a record high of $62 this week, up by 120% from its all-time low. This surge, together with its robust inflows, have brought its assets under management (AUM) to $12.18 billion, making it the fastest-growing ETF ever.

DRAM ETF is benefiting from the robust memory demand

The Roundhill Memory ETF is doing well this year, helped by the ongoing demand for memory amid the AI boom that has led to a global shortage. This shortage has led to robust revenue growth and profitability in the industry.

Most notably, analysts believe that the shortage will last for a while as companies are not in a position to ramp up production in the near term.

The most recent results showed that companies in the DRAM ETF are experiencing a revenue surge. For example, South Korea’s SK Hynix said that its revenue jumped by 60% QoQ and 198% YoY to 52 trillion KRW ($37.8 billion). 

It also improved its balance sheet, with its cash rising to KRW 54.3 trillion from KRW 14.3 trillion in Q1’25, while its debt dropped from KRW 23.3 trillion to KRW 19.32 trillion.

The same happened with Samsung Electronics, whose revenue jumped by almost 50x, while its operating profit in its chip division rose to KRW 53.7 trillion ($36.15 billion) from KRW 1.1 trillion in the same period last year.

READ MORE: Micron stock targets $1 trillion valuation as metrics show shares remain cheap

Other companies in the ETF like Micron, Sandisk, Seagate, and Western Digital also published strong results, and this trend will continue. For example, analysts expect that Sandisk’s revenue will jump by 165% this year to $20 billion, followed by $42 billion next year.

Similarly, analysts believe that Micron’s revenue will surge 193% this year to $109 billio and $173 billion next year. Seagate is expected to make $12 billion and $16 billion in the next two financial years.

SK Hynix, Micron, and Samsung pose major risk

The DRAM ETF faces some major risks ahead. One of them is the fact that it has climbed to fast. In most cases, assets that surge like this are usually vulnerable to pullbacks. Technically, this retreat normally happens because the assets get highly overbought. 

Concentration is the main risk that this ETF faces as the top three companies account for 77.7% of the fund. SK Hynix accounts for 29.9%, while Micron and Samsung account for 28% and 19.7% of the fund. 

This concentration means that the DRAM stock price will continue doing well as long as the three companies are thriving.  The risk, however, is that a major issue in one of the three companies will drag it substantially. One of the potential risk is earnings. While their numbers are expected to surge, an earnings or guidance miss can lead to a strong reversal. 

This concentration is enormous. For example, the ten biggest companies in the Nasdaq 100 Index account for 46% of its value. Similarly, the ten biggest in the S&P 500 Index account for 38%.