The AI hardware super cycle has hit a massive bottleneck, and it's not just the GPU that's the memory and as data centers scramble for power, the round hole memory ETF ticker DRAM has become the fastest growing ETF launch in history, surging past $20 billion in assets.
Now this severe memory Armageddon is driving record revenues for suppliers and forcing everyone from Apple to Sony to raise prices on consumer electronics.
Now Round Hill has partnered with the Rex to launch a new 2X leverage product which is ticker RAM will joining us this morning to weigh in and discuss the AI memory crunch and navigate this unprecedented demand as Dave Mazza, CEO of Round Hill Investments.
Dave, good morning.
Thank you so much for joining us.
So first and foremost, we're.
Keeping a close eye on the AI trade and what's happening below the surface now, Wall Street has treated memory chip manufacturers like Micron and Samsung historically as highly cyclical boom and bust operations.
So tell us why the AI data center buildout may be broken and in terms of that historical cycle and turn memory into a structural long-term trade here.
Yeah, no, you're absolutely right.
So over the years, the memory chip market has been incredibly cyclical and subject to boom-bust cycles that have been primarily driven by changes in consumer demand.
The AI data center buildout and the growth of AI, not just the training of models, but also the inferences that's needed, has actually changed the need for memory chips and made it much more structural.
So last week, Micron in their blowout earnings report announced 16 strategic customer agreements.
Payments that actually provided for a longer term floor on prices, which actually changes the revenue profile of that business going forward away from something that's subject to huge boom and bust cycles and one which can be valued more structurally with more consistent earnings and revenue potential going forward, which is one of the reasons why there's been a rewriting, uh, re-rating cycle, excuse me, when it comes to memory stocks that's just begun to start in our opinion.
Yes, and I can imagine that you and your team have had quite the busy Q1 and Q2, and your base DRAM ETF has also seen quite meteoric price action, but you also launched the 2X leverage product, which is trigger symbol RAM.
So tell us why a double leverage product right now.
Yes, so I think it's important to note for any investor or trader looking at leveraged products, you really need to have the ability to make a buy, sell or hold decision on a daily basis.
These are trading tools for someone who's looking to benefit from the long-term growth of the memory semiconductor space.
That's what DRAM is for.
But when we look at memory, particularly with the run up we've seen, there's.
Outside volatility and then downside volatility that can come as investors debate really that long-term thesis that plays out.
And so we partnered with the team at T-rex to bring RIM to market to complement DRAM for people who want to be able to take advantage of that volatility, make buy, sell, and hold decisions on a daily basis so that they can have amplified exposure again on that daily basis. expanding on what you just said, the underlying fund is concentrated in a few giants including Micron as well as Samsung, SK Hex.
So with this concentration, if one of these names lacks say product execution or misses earnings, what is the potential impact?
Yeah, I, what's interesting about the, the memory market and one of the reasons why we designed DRAM in this way is that if you look at the number of companies that actually are truly involved with the different types of memory chips, so high bandwidth memory, DRAAM, digital random access memory, um, some of the storage types of memory, there's really only a handful of companies and that's one of the reasons why DR RAM is so precise.
Really has around, um, you know, 10 or so holdings in the, in the portfolio today due to that fact.
So we didn't want to create a product that had memory on the name, uh but also has a longer term tail of companies that have very, very little to do with the space.
So the concentration is purposeful, um, but of course, when you have, you know, 3 quarters of the portfolio in the big three.
It's Micron, Samsung, and SK Hx who dominate the memory space.
Um, as those names go, so, so does the portfolio.
Um, so that is a bit of a trade-off, but I think net net over the long run, it doesn't really make sense to be exposed to memory unless you're actually exposed to the names that actually produce the revenue, um, from selling, from selling memory chips themselves.
And Dave, less than 60 seconds here, but global semi revenues projected to jump a whopping 63% this year.
So what is your realistic expectation for how long these companies can actually maintain pricing power before supply finally catches up?
Yeah, I mean, we're starting to hear chatter about this now where, you know, memory prices have started to impact consumer goods.
Of course, Apple is now looking for some cheaper sources of memory, but the long-term bottleneck is there.
Projections where the bottleneck would exist till 2026, now 2027.
Some folks thinking to 2030 because the demand is so much greater than the supply and it takes a very long time to bring that supply to market.
So I expect to see some shortages, not just for the subsequent year, um, but for likely years ahead.
Well, Dave, we will have to leave it there for today, but thank you so much for joining us early this morning and have a great holiday weekend.
Thank you.
