Artificial intelligence (AI) and the word bottleneck have long been joined at the hip. First, it was the race, still ongoing, for compute power. Next, it was the scramble for data center space, also ongoing. More recently, memory chips have emerged as another AI bottleneck. Specifically, there’s exponentially growing demand for dynamic random access memory (DRAM) semiconductors, and not enough supply. That scenario is propelling the Direxion Daily South Korea Bull 3X Shares (KORU).
KORU attempts to deliver 300% of the daily returns of the MSCI Korea 25/50 Index. It turned 13 years old in April, so it’s been around awhile. For much of its time on the market, it lived a relatively quiet existence compared to other geared ETFs. The DRAM bottleneck changed that for a simple reason: the MSCI Korea 25/50 Index allocates 45.45% of its weight to technology stocks. That includes a combined 41.62% weight to Samsung Electronics and SK Hynix — two of the dominant names in the DRAM space.
Call on KORU for Leveraged DRAM Exposure
Like any other leveraged ETF, KORU shouldn’t be turned into a long-term investment, but it is meeting the DRAM moment as highlighted by the fact that it returned an astounding 107.59% for the month ending April 28.
That’s impressive, but on the other side of the coin, traders may be worried that they missed the best of KORU’s run. There’s reasons to believe that’s not the case. In a recent epsisode of the Invest Like the Best podcast, Dylan Patel, founder and chief analyst at SemiAnalysis, said the DRAM story started perking up in earnest late last year. Plus, because fabricators can only add 20% to 30% annually, that story could have multi-year upside.
“Patel is right that supply cannot catch up before 2028. He is also describing exactly the conditions that historically precede the next glut. Own the cycle with your eyes open: buy the shovels, respect the math, and do not confuse the back half of a run with the front,” reported Ian Cooper for 24/7 Wall Street.
A couple of important points. First, KORU should not be held from now until 2028. No leveraged ETF should be treated that way. Second, memory is the most cyclical semiconductor segment. Even a minor bump in the road for Samsung or SK Hynix could punish this ETF. All that said, the DRAM thesis is alive and well for now, indicating tactical traders may find use for KORU.
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