Memory chip stocks slide as DeepSeek model slashes AI memory needs

Shares of SanDisk ↘ 4.03% fell more than 5% on Monday as investors dumped memory chip stocks in response to DeepSeek's latest AI model, which demonstrated sharp reductions in the amount of memory needed to run AI workloads. The selloff rippled across the sector, with Micron Technology ↘ 5.04% dropping roughly 5%, SK Hynix ↘ 7.00% falling more than 7% in Seoul, and Western Digital ↘ 3.65% and Seagate Technology ↘ 1.69% each declining more than 4%.ibtimes+1

The trigger was DeepSeek's V4.1 Flash model, released on September 10, which introduced architectural changes that cut key-value cache consumption to roughly one-quarter the high-bandwidth memory and one-eighth the SSD storage of its predecessor. In practical terms, that allows the model to serve four to eight times as many simultaneous users within the same memory footprint. The release first hit Korean markets on September 11, sending Samsung Electronics down 3.5% and SK Hynix down 2.2%, before spreading to U.S. markets Monday.startupfortune+2

A Double Blow for Chip Stocks

The DeepSeek-related concerns were compounded by a separate debate over the pace of AI development. Anthropic CEO Dario Amodei published a 3,800-word essay on Saturday titled "We Must Pace the Frontier," calling for a coordinated industry-wide slowdown in AI capability development. Leaders at other AI firms quickly endorsed the initiative. Broader chip stocks followed suit: Marvell Technology ↘ 5.68% shed close to 8% in premarket trading, while Intel ↘ 4.46% also fell sharply. Nasdaq futures tumbled 1.78%.blockonomi+4

Not everyone accepted the safety framing. Michael Burry, the hedge fund manager known for his bet against the U.S. housing market before the 2008 crisis, dismissed the slowdown calls on X as "self-serving," arguing that large language models are not genuine artificial intelligence and therefore have "nothing AI to slow down". He suggested the rhetoric serves as convenient cover ahead of planned stock market listings, writing that "IPOs need hype & puffery".businessinsider

The Bull Case Under Pressure

The memory sector's rally has been built on the assumption that AI workloads would require ever-increasing amounts of high-bandwidth memory and NAND flash storage. SanDisk's 52-week range spans from roughly $82 to $2,354, reflecting extraordinary investor enthusiasm. Among 24 analysts covering the stock, the average rating remains a Buy.stockanalysis+1

Whether DeepSeek's efficiency gains prove isolated or signal a broader shift remains an open question. Some engineers note that while the reduced inference memory footprint is meaningful, it does not diminish the massive memory required to train large AI models, suggesting the long-term implications may be more nuanced than Monday's selloff implies.ibtimes