Wall Street Collectively Bullish on Memory Stocks! Urges Holding AI Hardware, Says Kimi K3 Will Spark New Demand

Despite semiconductor stocks experiencing volatility since July, artificial intelligence (AI) hardware stocks continue to receive strong support from Wall Street analysts. After reassessing the impact of China's AI model Kimi K3, analysts believe the model has not diminished demand for AI infrastructure; on the contrary, it may boost demand for high-performance memory and storage chips due to increased computational scale.

AI hardware stocks have recently faced significant volatility. One of this year’s hottest trades has undergone correction amid multiple negative factors. As earlier gains accumulated, some investors chose to take profits. Meanwhile, technological competition from China’s AI models, coupled with ongoing market concerns about interest rate policies, widened chip sector losses last week, pushing it into bear market territory.

However, on Tuesday (21st), memory-related stocks staged a sharp rebound at the opening of U.S. markets. The Roundhill Memory ETF (DRAM-US), which tracks memory industry performance, surged 10.91% in a single day.

Individual stock performances were even more dramatic: SanDisk (SNDKV-US) soared 14.27%, SK Hynix (SKHY-US) rose 13.75%, Western Digital (WDC-US) gained 12.51%, Micron Technology (MU-US) climbed 12.17%, and Seagate Technology (STX-US) advanced 11.14%.

One key trigger for this rebound was the recent launch of Kimi K3, the latest open-source model from Chinese AI lab Moonshot AI, released last Thursday. The model performed competitively against top-tier U.S. models in multiple benchmark tests, immediately rattling market nerves.

Nonetheless, as market sentiment quickly recovered following the Kimi K3 release, multiple Wall Street institutions unusually spoke in unison, urging investors not to lose long-term confidence in AI hardware stocks due to short-term fluctuations.

The logic from Bank of America is particularly representative. A research team led by Vivek Arya argues that the release of open-source models like Kimi K3 does not weaken but further validates their bullish stance on memory chips.

The team highlighted a detail often overlooked by the market: Chinese open-source large models have API pricing far below their Western counterparts, with price differences ranging from 5 to over 350 times. However, this gap primarily reflects different business model choices, not a reduction in underlying hardware costs.

Bank of America believes that while high-performing Chinese open-source models like Kimi K3 may indeed threaten overseas tech giants with similar product lines, each time such a model is downloaded and used, it requires users to deploy their own computing environment—generating new demand for memory chips such as HBM, DRAM, and NAND.

UBS, Morgan Stanley, and JPMorgan: Three Major Banks Turn Bullish

Beyond Bank of America, several other Wall Street giants have issued optimistic assessments.

Ulrike Hoffmann-Burchardi, Chief Investment Officer for the Americas at UBS, clearly stated that her team does not believe the recent slide of chip stocks into bear market territory reflects a real oversupply issue, nor do they worry that cloud service giants will cut AI capital expenditures due to short-term profitability concerns.

She described the tech giants’ race as a 'winner-takes-all' survival battle. Even with limited short-term financial returns, capital spending will continue to flow in to prevent rivals from gaining irreversible technological advantages.

She also agrees that the emergence of new models like Kimi K3 actually creates more growth space for AI hardware manufacturers, as competition itself is driving up overall chip demand.

Morgan Stanley noted in a Monday report that the recent sell-off in memory chip stocks presents a perfect opportunity for strategic buying. Despite mixed signals elsewhere in the market, the supply crunch for data center memory chips continues to worsen.

UBS Group’s trading division also judged that the rapid sell-off of momentum stocks may be nearing its end, creating a timing window for investors to reposition their AI and semiconductor portfolios.

JPMorgan shares a similarly positive outlook, viewing the current downturn as consolidation ahead of the next upswing, not the start of a long-term decline.

The bank observed a growing gap between chip stock prices and company fundamentals, with technical indicators showing clear 'oversold' signals. As such, it recommends investors add positions during the summer months.

JPMorgan also expects AI-driven demand to keep DRAM supply tight through 2028, with the Q2 earnings season potentially acting as the next catalyst for a rally.

Views from seasoned market participants echo those of major institutions. Nancy Tengler, CEO of Laffer Tengler Investments, compared the market volatility triggered by Kimi K3 to last year’s DeepSeek launch, when panic-driven selling later proved to be a rare opportunity for strategic buyers.

Hendi Susanto, portfolio manager at Gabelli Funds, pointed out that although memory chip stocks have already seen substantial gains in recent months, the investment thesis remains intact. Market expectations continue to forecast demand outpacing supply next year, supporting favorable pricing conditions and strong profit momentum.