Hedge fund Ouroboros Capital said in a recent social media post that the latest selling in memory stocks has been driven less by deteriorating fundamentals and more by a gap between positioning and expectations. The firm warned that the group could still fall in the short term, while arguing that changes tied to High Bandwidth Memory, or HBM, and long-term agreements, or LTAs, are beginning to push the market toward a different way of valuing memory names.
Positioning and expectations, not fundamentals, are the key lens
In Ouroboros Capital’s view, the slide in memory stocks over the past few months is best understood through two variables: how investors are positioned and what they expect from the future. The fund said that once a trade becomes crowded and the room for positive surprise has largely disappeared, even very strong earnings may not be enough to stop selling pressure. It cited memory and broader chip names as a recent example of that pattern.
The firm added that several explanations offered after the fact — including lower-priced LTAs, NVIDIA beating AMD in hyperscaler customer bids, and the idea that memory prices will peak this year — amount to narrative layers added after the move rather than the main cause of it. Investors who keep focusing only on fundamentals, the fund said, risk misreading what comes next for the sector.
Holdings are lower, but residual positions may still pressure the group
On positioning, Ouroboros Capital said market exposure to memory stocks is now low. Forced liquidations and deleveraging have already cleared out many weak hands. Even so, it said two remaining buckets of capital could still create selling pressure.
- First are long-only funds and hedge funds that are still deciding whether to cut or fully exit their positions.
- Second are fast-money traders who entered over the past month expecting a quick return to all-time highs.
According to the fund, those residual positions are the reason memory stocks still face the risk of moving lower from current levels. It said it would look to buy within that range.
The market is still in a discovery phase
Ouroboros Capital described the present mood around memory stocks as a discovery phase, meaning the market has not yet formed a consensus on a fair valuation framework.
In the near term, the fund expects dip buyers to recognize that both spot and contract pricing for memory have already peaked, and that the odds of the group returning to prior all-time highs within the next 6 to 12 months are low. If those speculative buyers step away after taking losses, prices could come under fresh pressure.
Still, Ouroboros Capital said its medium- to long-term stance is not outright bearish. It pointed to continued HBM demand expansion as AI infrastructure buildouts continue, more stable revenue visibility for memory makers through LTAs, and capital return programs being advanced by Samsung and SK Hynix. The fund said the market could eventually re-rate memory stocks from cyclical names to stable, high free-cash-flow, or FCF, assets, and that this re-rating thesis is not yet fully reflected in share prices.
Fund discloses a long SK Hynix position at about 15% of the portfolio
On positioning, Ouroboros Capital said it is long SK Hynix with roughly 15% of its portfolio. It plans to add if the stock falls to KRW 1.1 million, and described itself as a long-term holder.
The fund’s bullish case rests on three points. It sees memory as a core industrial input with durable importance as AI and robotics grow. It believes a successful shift toward a “memory is not cyclical” narrative could open the door to valuation re-rating. It also said that, given the long-term relationship between the KOSPI, domestic wealth effects and the broader economy, the South Korean government may act at an appropriate time to support the share prices of SK Hynix and Samsung.
Bottom may not be in, but the longer-term entry window is open
In sum, Ouroboros Capital said memory stocks have probably not found their final bottom yet, and fresh lows remain possible as residual positions continue to clear. At the same time, it said investors willing to accept volatility and work with a longer time horizon may already be in a reasonable zone to start building positions gradually.
The fund added that a stronger reversal would likely require either a more complete washout in positioning or wider market acceptance of the idea that memory stocks should no longer be treated as purely cyclical.
The original article noted that the piece does not constitute investment advice.