Micron, SanDisk and SK Hynix shares have suffered a reversal of the artificial-intelligence boom, but Morgan Stanley believes forced selling behind South Korea’s market crash may be losing momentum.
The bank upgraded Korean equities to Overweight from Equal-weight on Monday, arguing that a “leverage washout” had created a better entry point into AI and industrial stocks.
Its 9,000 Kospi target implies 36% upside from Friday’s close.
The recommendation applies to South Korea, not directly to US-listed Micron or SanDisk.
Even so, it argues that if leverage caused more damage than weakening demand, July’s collapse may have reset valuations without ending the cycle.
Morgan Stanley says leverage drove the crash
Strategists led by Daniel K Blake described the Korean sell-off as “mainly technical”, Bloomberg reported.
They said the market had moved beyond the midpoint of unwinding leveraged exchange-traded funds, hedge-fund exposure and retail margin debt.
SanDisk lost 47% in July, Micron fell 29% and the Roundhill Memory ETF dropped about 32%.
SK Hynix and Samsung Electronics suffered steep declines as leveraged products magnified profit-taking.
Peter Kim, managing director at KB Securities, offered a similar diagnosis.
He told Reuters that the rout was “not driven by fundamental deterioration”, but by liquidity, fragile sentiment and forced unwinding across Korea and overseas markets.
Kim warned that accumulated leverage meant the clean-out would not finish within one or two weeks.
Morgan Stanley’s upgrade signals improving risk and reward, rather than an assurance that volatility has ended.
A Korea upgrade echoes across memory stocks
SK Hynix is the clearest beneficiary as it is a Kospi constituent and a supplier of high-bandwidth memory used in AI accelerators.
Morgan Stanley expects SK Hynix and Samsung to provide valuation support as investors revisit AI and industrial themes.
The read-through to Micron and SanDisk is indirect but meaningful. Micron competes in DRAM and HBM, while SanDisk supplies NAND flash storage.
Their products differ, yet all three depend on data-centre investment, memory pricing and confidence that AI demand can absorb capacity.
Forrester analyst Alvin Nguyen called the memory-stock sell-off an “overreaction” in comments to The Guardian.
He argued that manufacturers including SK Hynix and Micron cannot produce enough memory to meet demand, with the shortage potentially lasting until 2030.
Apple and Amazon reinforced that message last week. Their results highlighted rising memory costs and infrastructure spending.
Micron closed 5.9% lower on Friday and SanDisk lost about 5%, showing strong demand evidence has not displaced profit-taking or peak-cycle fears.
The buy signal carries important warnings
Morgan Stanley has not declared a bottom in every memory stock. The Kospi fell 4.5% early Monday after Friday’s record 17.9% rebound, while SK Hynix dropped 7.8% and Samsung lost 8%.
Expectations remain demanding. SK Hynix reported record quarterly results last week, yet its shares fell after earnings missed forecasts.
Investors want evidence of durable contracts, shareholder returns and pricing power, not simply rapid profit growth.
China presents the challenge. CXMT is expanding conventional DRAM production, while established manufacturers are investing in capacity.
Those additions may eventually ease shortages and squeeze margins, even if Chinese competition remains less advanced in premium HBM.
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