Mr. Tepper’s Wagers: A Memory for the Future

It is a truth universally acknowledged, that a gentleman in possession of a considerable fortune, must be in pursuit of further enhancement. Mr. David Tepper, whose wealth is presently managed with a discretion most admirable, has recently adjusted his portfolio with a boldness that invites observation. Having returned the greater portion of entrusted funds to their owners, his current investments reflect a personal judgment, unburdened by the expectations of others – a liberty not always afforded to those engaged in the management of public monies. It is, therefore, with some interest that one regards his present inclinations.

During the late quarter, Mr. Tepper demonstrated a marked preference for the concerns of Micron Technology, a company much lauded for its advancements in artificial intelligence. His commitment, substantial as it is, has been further augmented by an interest in another manufacturer of memory chips, a venture which, whilst less prominently discussed, merits a closer scrutiny.

A Diversification of Memory

Mr. Tepper has increased his holdings in Micron by a million shares, establishing it as a position of considerable weight within his portfolio. He has also acquired call options, representing a further 250,000 shares, a maneuver suggesting a confidence extending beyond the merely present. Alongside this, he has taken a significant stake – 1.875 million shares – in the iShares MSCI South Korea ETF.

This ETF, whilst encompassing a variety of Korean enterprises, is notably dominated by two principal players: Samsung Electronics and SK Hynix. Together, these firms account for a considerable proportion – exceeding forty-eight percent – of the fund’s total value. When combined with Micron Technology, one finds that these three companies collectively represent the vast majority of global memory chip production – a concentration of power that is not to be overlooked.

Indeed, the fortunes of Samsung and SK Hynix have largely dictated the performance of the ETF. Thus far this year, the fund’s progress has mirrored that of Micron, both having enjoyed an increase of approximately fifty percent, fueled by robust earnings and optimistic forecasts. This surge, it is generally understood, is a consequence of the ongoing scarcity of memory chips, which has naturally resulted in a favorable adjustment of pricing.

Mr. Tepper’s increased commitment to these manufacturers suggests a belief that the current demand will persist beyond the expectations of the more timorous amongst us. Such a continuation, should it prove accurate, would naturally lead to a sustained enhancement of earnings.

The iShares South Korea ETF offers an alternative avenue for investment in this cycle of demand. However, one must bear in mind that such prosperity is seldom permanent, and a prudent investor will not overextend himself in pursuit of fleeting advantage.

A Question of Prudence

Both Micron and the iShares ETF have already experienced a substantial appreciation this year. An investor entering the market at this juncture will, therefore, not enjoy the same favorable terms as Mr. Tepper. Nevertheless, if the demand for memory chips is indeed poised to continue for some time, a willingness to pay a premium may be justifiable.

All three companies are actively investing in expanding their capacity and adapting existing facilities to meet the growing demand for high-bandwidth memory (HBM). These chips, essential components in conjunction with GPUs and other AI accelerators, serve to mitigate the bottleneck in data access crucial for both AI training and inference. As large language models grow in complexity and applications proliferate, the need for substantial quantities of fast memory chips has understandably led to a considerable surge in demand.

The establishment of new foundries requires a considerable period of time – several years, in fact – before they can commence production. Consequently, the shortage of memory chips is likely to persist well into 2027. It is, of course, possible that purchasers are anticipating this scarcity and are over-ordering or stockpiling chips, in an attempt to gain an advantage over their competitors. Such a maneuver, whilst understandable, creates an artificial elevation of demand, at the expense of future requirements.

Combined with the anticipated increase in supply from all three companies in late 2027, we may well witness a significant shift in the balance of supply and demand by 2028. Unless, of course, some unforeseen event precipitates another surge in demand – a possibility which, whilst not entirely improbable, remains inherently unpredictable. Consequently, an investor should not be willing to pay excessive multiples of a memory chipmaker’s earnings, given the uncertainty surrounding their long-term sustainability.

Micron shares currently trade at 12.6 times forward earnings estimates – a relatively high multiple, given the stage of the cycle. Shares trade at 9.6 times 2027 earnings estimates, suggesting that investors anticipate the continuation of this favorable cycle beyond the end of next year.

SK Hynix shares are notably less expensive, trading at 5.9 times earnings estimates for the current year. However, Samsung shares are priced at 9.8 times earnings expectations. Both still appear somewhat overpriced, given the anticipated slowdown in earnings growth next year – a clear indication of the maturation of the demand cycle.

Whilst the iShares Korea ETF presents an interesting avenue for investment in the memory chip market, it too appears overextended, following the recent surge in shares of SK Hynix and Samsung. Consequently, it is difficult to recommend following Mr. Tepper’s example at this juncture. However, it is certainly worth keeping a watchful eye on both Micron and the iShares ETF, as circumstances may yet evolve.

2026-03-04 17:33

A Diversification of Memory

A Question of Prudence

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