ABOUT THIS EPISODE
Memory has been one of the strongest corners of the semiconductor industry, and strong returns invite hard questions. In the second part of this series, equity analyst Shan Rui Yeo examines the main risks to the memory thesis: rising competition from China's CXMT and YMTC, the technologies that could reduce AI's appetite for memory, and the wave of capacity investment that could eventually tip the industry back into oversupply. He weighs each risk against the constraints holding it back, from equipment export controls to limited EUV supply, and notes that memory companies already trade at three to five times forward earnings. The conversation closes on a working principle: treat the terminal value as a distribution, not a fixed number. Key Takeaways
- China's CXMT is expanding DRAM capacity aggressively, but export controls on sub-18 nanometre equipment and EUV keep its effective supply share (about 10%) below its capacity share (about 15%).
- YMTC is the more credible technological threat: NAND density comes from stacking layers, and its Xtacking hybrid bonding architecture is proprietary.
- Efficiency gains may grow memory consumption rather than reduce it; cheaper tokens get spent on larger context windows (the Jevons paradox).
- The deepest risk is architectural: if large language models are not the path to AGI, the next paradigm may not be memory hungry, so terminal value is a distribution, not a fixed number.
- Announced capex is enormous but back-loaded into the 2030s, and EUV and equipment capacity are the bottleneck to bringing it online.
- Memory companies trade at three to five times forward earnings; the market is not assuming supernormal profits forever, and the NAND supply outlook is better in the near term.
Companies Mentioned: Samsung, SK Hynix, Micron, CXMT (ChangXin Memory), YMTC (Yangtze Memory), Apple, NVIDIA, Google, ASML, Applied Materials, KLA, Lam Research, TSMC, Intel, Kioxia Host: Rob Campbell, CFA, Institutional Portfolio Manager Guest: Shan Rui Yeo, CFA, Equity Analyst
This episode is available for download anywhere you get your podcasts.
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