The viral Roundhill Memory ETF (CBOE: DRAM) is losing momentum as its outflows jump. Its top constituent companies also remain in a technical bear market, having fallen more than 20% from their highest levels this year. It ended the week at $59.10, down by 27% from its highest point this year.
DRAM ETF Outflows are Rising
Investors are fleeing from DRAM, the ETF that went viral a few months ago by tracking the biggest companies in the memory industry.
ETF Db data shows that the fund has recorded outflows for 14 consecutive days and has now lost assets in each of the last three consecutive weeks. As a result, its total outflows have jumped to over $1.97 billion in the past 30 days, bringing its assets under management down to $26.9 billion, still making it one of the most successful ETF launches this year.
DRAM’s outflows have coincided with the ongoing weakness of most companies in the memory industry. Samsung Electronics, its biggest constituent, has slipped by over 30% from its highest point this year. Similarly, SK Hynix, the biggest company in the high bandwidth memory (HBM) industry, has fallen by nearly 40% from the year-to-date high.
Other top memory companies have dropped sharply from their peak. In the United States, Micron (NASDAQ:MU) has fallen by 22%, while Sandisk (NASDAQ:SNDK) and Western Digital (NASDAQ:WDC) have slipped by 30% and 45% from their all-time highs.
Strong Revenue Growth and Cheap Valuations
On the positive side, all these companies are seeing strong revenue growth and are trading at bargain prices. Micron’s third-quarter revenue jumped to $40 billion, and management predicts the fourth quarter one will soar to over $51 billion. SanDisk, Samsung, and SK Hynix also released strong financial results as the artificial intelligence boom continues.
Most notably, these companies have announced multi-year deals that help to offset the seasonality of the memory industry. SanDisk has announced deals worth over $90 billion with the top hyperscalers. These deals have set the ceiling and floor for their products.
At the same time, key multiples suggest that the companies are highly undervalued. Samsung Electronics and SK Hynix trade at price-to-earnings ratios of less than 15, lower than the KOSPI Index’s average of 19. This is one reason why they announced large share buybacks recently.
Similarly, Micron has a forward price-to-earnings ratio of 13.28, while SanDisk has a multiple of 7.6. Kioxia, a top Japanese semiconductor company, has a trailing PE ratio of 13. These valuations, coupled with their strong growth, mean that the companies will rebound, which will boost the DRAM ETF.
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