The Roundhill Memory ETF (DRAM) is bracing for a pivotal week that could make or break its performance. DRAM has already plunged by over 31% from its highest point this year, and key earnings this week will determine its trajectory.
Key DRAM ETF companies will publish their earnings
Top companies in the DRAM ETF will release their earnings this week, providing more color about the memory sector.
Micron Technology has already published its earnings, which showed that its revenue jumped by 300% to over $40 billion. The company’s guidance is that its revenue will jump to $50 billion in the fourth fiscal quarter.
Samsung Electronics, the second-biggest DRAM constituent, will publish its final earnings report this week. These earnings will not be a big surprise since the company has already released its preliminary numbers.
The results come a few days after the company received a $200 billion deal from Broadcom. Despite this, Samsung stock dropped to KRW 254,000, down by 32% from its highest point this year.
SK Hynix, the third-largest company in the DRAM ETF, will also release its numbers this week. These will be the first earnings report since the company launched its ADRs in the United States. As such, market participants will watch on whether its growth is accelerating.
Other smaller companies in the fund like Seagate and Japan’s Kioxia will also release their numbers this week.
Big Tech Companies to Publish their earnings
In addition to its constituent companies, big-tech names like Microsoft, Meta Platforms, Amazon, and Apple will release their numbers. Microsoft and Meta will go first on Wednesday, followed by the other two on Thursday.
These earnings are equally important because of the ongoing data center spending, which has contributed to the memory shortage. For example, Meta Platforms inked a multi-year deal with SanDisk to support its massive AI infrastructure expansion. Meta will deploy 7 gigawatts of computing capacity this year and double to 14 by 2027.
These earnings reports will be important because they will provide more color on capital spending. A sign that some or all these companies are boosting their spending will boost their stocks. On the other hand, a sign that they are slowing down will negatively impact the DRAM ETF.
There is a risk that some of these firms will lower their spending. For example, Google stock dropped sharply after boosting its capex to over $205 billion.
The DRAM ETF will also be in the spotlight after the latest CXMT IPOin Hong Kong that made it the biggest Chinese company. DRAM has allocated its capital to companies in the US, Japan, Taiwan, China, and South Korea. As a result, traders will be watching whether Roundhill will add CXMT to the fund in the near term.
DRAM faces some major risks
The Roundhill Memory ETF faces some major risks ahead. The most important one is that it is a highly concentrated fund, with the top three names accounting for over 70% of the fund. As such, a big decline for one of these names will negatively affect its performance.
Similarly, these companies largely depend on similar companies. As a result, if the Magnificent 7 spending plans miss estimates, all companies will be affected.
DRAM ETF chart | Source: TradingView
Technically, DRAM is trading at the 50% Fibonacci Retracement level. It has dropped below the 50-day Exponential Moving Average (EMA) and has formed a head-and-shoulders pattern. Therefore, there is a risk that the ETF will drop further in the near term.
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