Since entering August, the U.S. stock market's "fear gauge," the VIX, has been steadily declining, dropping from highs around 20 to around 15, and even touching 14.2 during yesterday's session. Against this backdrop of volatility bottoming out, the S&P 500 has accumulated a gain of about 16% year-to-date, equity funds have seen net inflows for 12 consecutive weeks, and U.S. stocks have risen for three straight weeks, repeatedly hitting new record highs.
Everything looks calm and peaceful. But it is precisely at such times that alarms are starting to sound at some Wall Street institutions.
1. What Kind of Alarm Has the VIX Triggered?
Wall Street institutions generally view the period from mid-August to mid-October as a historically turbulent time for the market.
The statistical model from investment firm BTIG even provides specific numbers: in every midterm election year since 1990, the equal-weight S&P 500 index has experienced a pullback of at least 7% from its average peak around August 18th to mid-October—without exception.
The implication of this pattern is straightforward: we are entering the worst calendar period for midterm election years; don't get too comfortable. Especially with volatility currently suppressed to extremely low levels, the market is likely underestimating the fragility of this rally in the face of unexpected negative news. The more compressed the spring, the harder it bounces back.
2. Amidst the Calm, Memory Stocks Have Seized the Spotlight Again
Interestingly, just as the VIX remained dormant last night, the memory chip sector broadly rose again, reclaiming market focus: SK Hynix closed up about 3%, SanDisk closed up nearly 9%, and Micron closed up over 4%.
In this low-volatility market, capital seems to have reached a tacit understanding—memory is currently the only sector with hope of continuing to strengthen.
3. The Three Cards Held by Memory Bulls
Why can memory still rise? Looking closely, the logic has three layers.
First, price increases haven't stopped; they are accelerating. Guidance from U.S. investment bank KeyBanc shows DRAM prices rising 15% to 20% in Q3, and another 15% in Q4; NAND prices directly surge 30% to 40% in Q3. Note, this is not a short-term pulse caused by downstream manufacturers collectively restocking inventory, but a structural shortage: HBM and advanced DRAM are consuming a large portion of foundry capacity, squeezing production lines for standard DRAM and NAND, leading to a passive shortage.
Second, supply-side discipline is surprisingly strong. Memory manufacturers hold a large number of long-term agreements, simply put, locking in future one- to two-year purchase volumes and prices in black and white with customers ahead of time, with Micron having the highest coverage. With these long-term agreements in hand, no one has an incentive to suddenly expand capacity or cut prices to grab market share. Bank of America even stated: AI has permanently altered Micron's cyclical stock attributes, with EPS projected at $236 by 2030 and gross margins maintaining around 80%.
Third, the long-term thesis has corporate backing. SanDisk recently committed at its Investor Day to maintain mid-to-high single-digit to 15% revenue growth from FY2028 to FY2030; it also jointly with Japan's Kioxia released the ninth-generation 2Tb QLC NAND flash—QLC is a storage technology that can pack more data into the same area, with lower cost and higher capacity, precisely targeting AI data center storage. This essentially publicly announces: it's coming to seize the territory of hard disk drives (HDDs) in data centers.
4. Where Are the Hidden Risks?
The bullish logic is smooth, but the risks cannot be ignored either.
First point: Chinese supply. ChangXin Memory once held the position of China's highest-valued company; PC giants like HP, Acer, and Asus have begun small-scale adoption of its products; Yangtze Memory Technologies' NAND shipments have squeezed into the global top three. Chinese manufacturers temporarily cannot break into the high-end market, but their strategy can be to start from low-end models, pushing prices upward layer by layer—this is the Sword of Damocles hanging over all memory manufacturers.
Second point: The psychological trap of cyclical stocks—no one believes they will fall when they are rising. Micron's stock price previously retreated 23% from its highs without any new earnings reports; Kioxia was even more drastic, first falling 48% before rebounding. The market itself is now debating: is this current rally the last surge before a peak, or a mid-hill consolidation? No one can provide the answer in advance.
Third point: All demand eggs are in the AI basket. The "off-balance-sheet AI commitments" of the nine major tech companies—AI procurement and investment commitments signed outside the balance sheet, not yet turned into actual expenditures—approach $3 trillion. The demand seems massive, but once the giants enter a "digestion period," meaning pausing new orders to first utilize existing computing power, storage demand will be the first to experience a gap. More importantly, investment bank Bernstein has already raised its WFE expenditure forecast for the next two years by 75%—WFE refers to wafer fab equipment spending, which can be understood as the money memory manufacturers spend on buying machines and building new production lines. A surge in equipment orders means the seeds for the next round of overcapacity are already being sown now.
5. Final Thoughts: The Medium-Term Trend Remains, But the Era of Blind Buying Is Over
After laying out both the bullish and bearish sides, the conclusion is actually quite clear: in the medium to short term, the memory sector is likely to maintain its bullish trend, with the price increase cycle lasting at least until 2027. But it must also be stated clearly—at this current level, it is no longer a stage where buying blindly will guarantee profits.
Ordinary investors need to closely monitor these signals going forward:
First, the month-on-month slope of NAND contract prices, i.e., how much contract prices rise each month compared to the previous month. If the rate of increase slows or flattens, it indicates the shortage logic is loosening. Second, the long-term agreement coverage ratio of manufacturers. If the proportion covered by long-term agreements starts to decline, it suggests manufacturers themselves are less confident about the future. Third, the progress of Chinese memory makers' high-end market entry. Once companies like ChangXin break into the high-end market, the price system will be reshuffled.
Whichever of these three signals turns first will likely represent the top of the current cycle.
[Important Notice] This article is authored and provided by an external contributing writer. The market data, institutional forecasts, and historical statistical patterns mentioned herein are for reference only and do not constitute investment advice, an offer, or an invitation to offer, nor do they constitute a recommendation to buy or sell related securities. The views, analyses, and judgments expressed represent the author's personal opinions and do not represent the official position of BIT or BIT Research. BIT makes no guarantees regarding the accuracy, completeness, or timeliness of the content. The third-party institutional views cited (including those from KeyBanc, Bank of America, Bernstein, BTIG, etc.) represent only the opinions of those institutions or analysts and do not represent BIT's position, nor is their accuracy guaranteed. Historical patterns and past performance do not guarantee future results. Long-term profit forecasts involve significant uncertainty. Investment involves the risk of principal loss, particularly as the memory chip industry is highly cyclical, and market prices can fluctuate substantially. Investors should consider their own financial situation and risk tolerance and make their own decisions after consulting independent professional advisors.
