Here’s a Solid Backdoor Trade on the Memory Boom

The memory chip boom has been one of the most explosive stories of the year, and it might not be over with quite yet, even as some of the bears, like Dr. Michael Burry of The Big Short fame, stand by their shorts. With SK Hynix (NASDAQ:SKHY) joining the likes of Micron (NASDAQ:MU | MU Price Prediction) on the U.S. exchanges, investors have one more option to consider as a play on the global memory chip shortage.

SK Hynix and Micron have been major movers. But they might be too choppy to handle

Even as Micron takes more market share, SK Hynix is still a force to be reckoned with, especially as it ramps and maintains its dominance in the high-performance memory (HPM) scene.

With the Nvidia (NASDAQ:NVDA) partnership in place and a stranglehold on the HPM market, perhaps there is no touching SK Hynix as the South Korean firm looks to sell out even more of its capacity as AI demand looks to stay hot until 2030 and maybe even a bit beyond. Any way you look at it, SK Hynix’s top boss sounded pretty upbeat about the structural shift going on in the memory market.

Of course, investors should take the words of a CEO with a fine grain of salt.

At the end of the day, the memory plays do not come without their own fair share of risks. If a stock can double up many times over in just a year, you can bet that it can implode by an equally devastating amount, and it might not take a confirmation of deteriorating AI demand to cause such a nasty sell-off.

The latest plunge in semis, which saw memory chip makers get caught at ground zero, was absolutely vicious, but healthy, especially given the run in the rearview.

iShares MSCI South Korea ETF

For investors looking to bet on memory while going above and beyond Micron, perhaps the iShares MSCI South Korea ETF (NYSEARCA:EWY) is worth a closer look this August. There’s no doubt that the ETF is heavily weighted in the two top memory makers, SK Hynix and Samsung (they account for north of 40% of the fund), the latter of which hasn’t yet arrived in the U.S. markets.

Arguably, Samsung might be the less-appreciated relative value play in the memory pool. And until the name has a U.S. IPO of its own, perhaps going down the route of the iShares MSCI South Korea ETF isn’t the worst idea in the world. Samsung is spending a fortune to expand its HBM capacity, and while the legendary South Korean conglomerate is far from a pure play on the memory boom, I still think it’s a diversified titan that’s still way too cheap to ignore.

The memory correction has weighed quite heavily on the South Korean stock market, with the iShares MSCI South Korea ETF still down more than 22% from its peak hit back in June.

The bottom line

If this isn’t it for the memory firms, perhaps the dip is worth exploring further, especially for investors still interested in betting on the boom with a discount — the South Korean discount, but with a bit of diversification across other corners of the heated South Korean market. Indeed, it’s not all about memory. It plays just shy of half of the pie. As for the other half, a mix of financials (banks), industrials, autos (Hyundai/KIA), and more are being thrown in.

Either way, the South Korean market itself looks like it’s overdue for a bounce, and as a great backdoor to play the memory boom, I’d encourage investors to stash the ETF on their radar if they’re looking for a cheaper, less-terrifying way to play the strength.

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