A surge in memory chip shares is driving gains in U.S. and South Korean stock markets, but market experts warned it is dangerous to forget the memory industry’s inherent cycle, CNBC reported on May 25.

The memory industry has grown steadily, helped by an explosive rise in demand for high-bandwidth memory (HBM) since ChatGPT’s launch in December 2022, the report said. Samsung Electronics and SK Hynix shares are up 114 percent and 186 percent so far this year, respectively. In the United States, Micron and SanDisk have risen 141 percent and 156 percent.

A key argument behind the strength in memory shares is the belief that AI has ended the memory industry’s chronic boom-and-bust cycle.

Memory company executives argue that high prices could be sustained for years due to a structural shortage of supply.

William de Gale (윌리엄 드 게일), a portfolio manager at BlueBox Asset Management, told CNBC that the memory industry has historically repeated extreme swings. He said it is a "pretty terrible" industry over the long term. He said a pattern has repeated in which conditions turn "terrible" shortly after claims emerge that the memory cycle has disappeared and the industry has become one that creates long-term value.

Memory supply is very tight at present, but technologies that could reduce demand are also emerging. Google unveiled TurboQuant, a compression technique that can cut memory needed to run large language models to one-sixth. Shares of major memory companies plunged right after the announcement.

John Cunliffe (존 컨리프), chief investment officer at JM Finn, said there is room for supply constraints to ease as production rises meaningfully over the next three years. He said current share prices are based on the premise that high prices will last for a long time, companies will refrain from overinvestment and profit margins will remain much higher than in the past.