As advisors and investors (plenty in the retail cohort) know, one of this year’s most prominent technology themes is the rapid run-up in memory semiconductor stocks.

We’re talking about dynamic random access memory (DRAM) one of just a few examples of AI bottlenecks. At the investment level, DRAM and NAND flash memory chip shortages are manifesting in a variety of ways with two of the most prominent being Micron Technology (NASDAQ: MU) now ranking a the 10th largest member of the S&P 500 and the rapid success of the Roundhill Memory ETF (DRAM).

I profiled DRAM on April 11, nine days after it came to market. Today, it’s a $24.35 billion (largely retail money) fund and by some accounts, it set the record for fastest ETF to $20 billion in assets under management (AUM).

Reaching that AUM mass in just three months confirms investors like DRAM’s investment objective and that the fund is an undisputed success. The thing about successful ETFs is that they spur competition and DRAM has that in the form of the newly launched Kurv Memory Select ETF (CBOE BZX: KMEM).

Even More Exposure to the ‘Big Three’

Advisors know this and retail investors are learning it: The memory semiconductor space is largely dominated by just three players: Samsung, SK hynix and Micron Technology. Those stocks combine for three-quarter of the DRAM portfolio, but the newly minted KMEM takes that percentage up to 80%.

It’s a reasonable approach because those are the companies that dominate the DRAM and NAND markets and when those stocks are trending in investors’ favor, simultaneous exposure to all three can be advantageous.

“Names that are merely ancillary to this theme could in fact become hindrances to performance as the current leaders consolidate their positions and upstarts work to obtain market share,” notes Howard Chan, Kurv founder and chief executive officer.

Alone, SK Hynix commands 41.53% of KMEM, which is pertinent for a variety of reasons. First, it’s a reminder that KMEM, like its rival, is actively managed. Due to IRS Regulated Investment Company (RIC) diversification rules, passive funds cannot allocate more than 25% of their portfolios to individual stocks.

Second, South Korea-based SK Hynix will soon sell shares in the U.S., likely broadening its investor base in the process. Third, Chan says KMEM focuses on stocks such SK Hynix “where valuation is still cheaper compared to its competitors.”

Not for the Faint of Heart

The point of this piece isn’t to degrade or endorse DRAM, KMEM or any memory stock. That said, I’ll offer up a personal tidbit. Given that I live in the Pacific time zone, I have the luxury of being able to “check in” with Asian markets before bedtime. It’s something I find myself doing more frequently since DRAM debuted.

Recently, it sure feels as though South Korea’s KOSPI hits circuit breakers and swings in wide percentage bands several times a week and those events are attributable to, you guessed it, leverage (largely retail) behind Samsung and SK Hynix.

Yes, the memory bottleneck can extend for another three of four years as Chan estimates, but investors would do well to assess personal risk tolerances before getting involved with DRAM or KMEM because these ETFs won’t move up in straight-line fashion and there will be bumps along the way.