ETF Edge on Roundhill's Memory ETF surpassing $6 billion in record time
Speakers
Dave Mazza
— CEO, Roundhill Investments
Drew Pettit
— Research Director of U.S. Equity Strategy and ETF Strategy, Citi
Summary
The episode focuses on the memory chip supply-demand imbalance as a key AI investment opportunity, with Roundhill's Memory ETF seeing record inflows. Citi's Drew Pettitt highlights earnings momentum in DRAM stocks and recommends oil as a geopolitical hedge, while also favoring South Korean and Taiwanese equities for AI exposure. Roundhill's Dave Mazza discusses optical names as the next bottleneck and the potential for prediction market ETFs.
- Memory chips are the biggest bottleneck in the AI buildout with supply-demand imbalance expected to last years.
- Roundhill's Memory ETF is one of the most successful ETF launches, benefiting from sustained AI demand.
- Drew Pettitt of Citi sees DRAM stocks as having strong earnings momentum backing price momentum.
- Pettitt recommends buying oil as a commodity tail risk hedge against Iran conflict escalation.
- South Korea and Taiwan are favored emerging markets for AI-driven growth, driven by memory supply chain exposure.
- Optical stocks like Credo, Coherent, and Lumentum are identified as the next phase of AI infrastructure bottlenecks.
- US large cap growth stocks are viewed as a geopolitical hedge, insulated from global conflicts.
- Prediction market ETFs face regulatory delays but are seen as a potential new frontier for portfolio diversification.
Trade Ideas
Memory chip bottleneck persists for years.
Memory chips are the biggest bottleneck in the AI buildout due to a significant supply-demand imbalance that will persist for years (2026-2028) because building new fabrication plants takes 3-5 years. The shift from consumer-driven cyclical demand to sustained data center demand, along with longer-term contracts, makes memory stocks less cyclical and supports a rerating. The Roundhill Memory ETF is a pure play on this opportunity.
DRAM stocks have earnings momentum.
Price momentum in DRAM and semiconductor stocks is backed by strong earnings momentum. Earnings revisions have been substantial (e.g., Micron added $5 to S&P 500 earnings this year). Despite triple-digit price moves, stocks remain reasonably priced relative to the six-to-eightfold increase in earnings expectations over the next few years, supporting continued upside.
Long Korea and Taiwan equities.
AI-driven growth is concentrated in emerging markets, specifically South Korea and Taiwan, due to their exposure to the memory (DRAM) supply chain. The KOSPI in South Korea has been driven higher by DRAM names, making these countries attractive for investors seeking fundamental AI stories outside the US.
Optical stocks next AI bottleneck.
Optical names like Credo, Coherent, and Lumentum are critical for enabling semiconductor chips to communicate with each other in data centers. As AI compute scales, these interconnect components represent the next bottleneck after memory, making them compelling plays on continued AI infrastructure buildout.
Buy oil as tail risk hedge.
Buy oil as a commodity (not oil equities) as a tail risk hedge. The tail risk of an extended Iran conflict is not fully priced in, making oil a useful portfolio hedge against geopolitical escalation.
US large cap growth as hedge.
U.S. large cap growth stocks serve as a favorable geopolitical hedge. They are relatively insulated from global conflicts compared to other regions, and the demand source for these companies remains intact, making them a defensive trade during geopolitical uncertainty.
