Betting All the Chips on Memory ETFs

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It’s the fastest-growing new ETF in recent memory.

The Roundhill Memory ETF (DRAM) has shot up to $1.5 billion in assets since its April 2 launch, thanks to a flood in flows and returns of nearly 38% to date. While it’s still very early days for the thematic fund, its performance hints at the demand for exposure to a critical piece of the artificial intelligence race. The new fund is already Roundhill’s second largest, sitting behind its $4.5 billion Magnificent Seven ETF (MAGS).

“The early investor interest in DRAM reflects a growing appreciation that memory chips are the true bottleneck in the AI buildout,” Roundhill Investments CEO Dave Mazza told ETF Upside. “Everyone talks about GPUs, but without high-bandwidth memory, those GPUs can’t function.”

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Chips on the Table

It’s a niche area, and concentration (and the risk associated with it) is the consequence of having only about a dozen holdings. Among the Memory ETF’s top allocations, about 75% are in three stocks: SK hynix, Micron Technology and Samsung Electronics. But concentration is also the pure-play experience in this case, and other semiconductor ETFs aren’t tailored to memory chips, Mazza noted. “Investors have had very few good options. South Korean ETFs do offer exposure to Samsung and SK hynix, but they come with significant baggage including holding a lot of names that have nothing to do with memory or AI,” he said. “In addition, semiconductor ETFs are poor access vehicles. In most cases you get little to no meaningful exposure to pure-play memory names.”

Still the relatively broad category of semiconductor ETFs is doing well this year:

• The $56 billion VanEck Semiconductor ETF (SMH) has returned 39% year to date.

• The $28 billion iShares Semiconductor ETF (SOXX) is up nearly 47%.

• State Street’s $2.3 billion SPDR S&P Semiconductor ETF is up 43%.

A Little Competition: It’s rare that any ETF issuer gets the benefit of exclusivity, especially when demand is apparent for a strategy. How many firms will pursue memory ETFs remains a question, but at least two others are prepping launches. Earlier this month, KraneShares filed with the Securities and Exchange Commission for its High-Bandwidth Memory ETF, and Tema ETFs did so as well. Ticker and fee information for those funds haven’t been published, but the investment strategies show that they may overlap with that of Roundhill’s ETF. The KraneShares fund, for example, will invest at least 80% of net assets in companies where at least 50% of their revenues are related to high-bandwidth memory, dynamic random access technology or not-and flash (NAND) memory, the latter of which includes solid-state drives using the technology.

“As hyperscalers continue to pour hundreds of billions into AI infrastructure, a disproportionate share of that spending flows directly into memory and specifically into HBM, where supply is constrained and only three companies in the world can manufacture it at scale,” Roundhill’s Mazza said.

This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter.