Chip Selloff Deepens as Google Touts Memory Breakthrough

Memory chip stocks extended their losses on Thursday after Alphabet Inc.’s Google publicized research that could allow more efficient use of storage needed for artificial intelligence (AI) development, Kurt Schussler and Debby Wu reported for Bloomberg News.

SK Hynix Inc. and Samsung Electronics Co., South Korean leaders in the market, fell more than 6% and about 5% in Seoul. (Photo: NTD Group) 

SK Hynix Inc. and Samsung Electronics Co., South Korean leaders in the market, fell more than 6% and about 5% in Seoul.

In the US, Micron Technology Inc., Western Digital Corp., and Sandisk Corp. slid more than 2% in pre-market trading, after all closing lower on Wednesday.

Memory chip companies have been on a tear in recent months as rapid AI infrastructure development triggered a spike in chip prices, boosting profits and stocks.

Four hyperscalers, led by Amazon.com Inc. and Google, plan to spend about $650 billion this year to build data centers, acquiring Nvidia Corp.’s AI accelerators and related memory chips.

SK Group Chairman Chey Tae-won recently said the memory chip crunch could last until 2030.

However, Google’s new technology could alleviate some shortages and push prices down.

Google publicized the research on X this week, although it was originally released last year. The company said its TurboQuant technology can cut the memory required to run large language models by at least a factor of six.

“If models can run with materially lower memory requirements without losing performance, the cost of serving each query drops meaningfully, resulting in more profitable AI deployment,” he said.

Like many bullish analysts in the AI industry, he cited a theory known as the Jevons Paradox, a concept from an English economist regarding coal production, which suggests that as technology becomes more efficient, overall demand increases.