Memory Stocks Are the New Stars of FOMO Investing. Why I’m Waving a Yellow Flag Here.

Call it a case of “memory lapse.” The prices of the two memory stock-focused ETFs I track most closely, the Roundhill Memory ETF (DRAM) and the Tema Memory ETF (DISK), seem stuck in a rut lately. 

DRAM shareholders saw the ETF sprint higher by 190% in about 10 weeks following its April 2 debut. Then, they watched it lose more than 40% in about half that time (5 weeks). DRAM is still up more than 100% since it started trading. 

But this is not “long-term growth investing” behavior, and it is not based on earnings trends or other fundamentals. It is fear, leverage, arrogance, and greed. The first letters of those four words spell “FLAG,” so that’s what I’ll call this strange time in market history. 

The “FLAG” era is one component of the fear of missing out (FOMO) trade. It’s one part easy credit conditions, and many parts the fact that a lot of wild market speculation has not yet been “margin called” to account. When it is, the blip on the radar that was the Situational Awareness LP blowup will look like a scratch.

Remember that with ETFs like DRAM, we are talking about a small set of influential holdings. There are 25 names in the fund, but these 6 stocks below, most of which are owned both directly and via derivative instruments, drive DRAM. 

This chart is what I’d refer to as “leaking.” It is showing signs of again breaking down after a fleeting rally. I’d also point out that it has been flat since around Memorial Day.

Number Goes Up…’Til It Doesn’t 

There’s too much “number go up” happening, and it has been happening for too long. Just long enough to go from happy frenzy to pure bubble. That includes too many quirky ETFs hitting the market that investors don’t understand, including covered call and leveraged ETFs, as well thematic ETFs dedicated to recently hot market areas that might be part of history’s cautionary tales by the end of this decade.

The proliferation of niche ETFs is part of this. I’m as big an ETF advocate as you’ll find. When markets transition from enthusiasm to a pure bubble, Wall Street’s product engines flood the market with specialized vehicles designed to capture fleeting retail mania. I actually like the idea of pure-play memory ETFs (DRAM, DISK). 

Why Is DRAM’s Price Falling?

The most recent 10% pullback in DRAM is not a sign that real-world demand for computer memory has vanished. It is another demonstration of how market expectations and leverage collide. I like my ETFs concentrated, but maybe in this case, it is too much. Mostly because the industry tends to trade in unison. 

Although High-Bandwidth Memory (HBM) demand for AI infrastructure remains elevated, institutional analysts have begun projecting that the year-over-year growth rate of DRAM contract prices is nearing its peak. When markets sense that growth momentum is slowing, equities reprice downward well before spot memory prices drop. And it happens fast. Even during the slow days of late August.

Rob Isbitts is a semi-retired CIO, former fiduciary investment advisor, and Barchart columnist. Check out his other work at ETFYourself.com (featuring the Fresh Charts weekly trading post), and ROAR.PiTrade.com, helping investors to better-manage their own portfolios.