Analysts at Jefferies Financial Group Inc. believe the recent pullback in memory chip stocks is a reasonable development following their substantial earlier gains, but caution that the recent declines should not be interpreted as signaling a new downtrend for these high-flying equities.

In a report issued Thursday, analyst Christopher Wood noted that while some AI-related market softness is currently evident, memory companies are positioned for further gains as there is no sign of a decline in computing demand on the horizon.

Wood wrote in the report, "As long as the AI capital expenditure arms race continues, the beneficiaries will remain the 'picks and shovels' trades—the companies getting paid for the capex, not the ones spending it." He added, "Since the start of 2023, the four major hyperscale computing firms are up 180%, while the three dominant memory makers—Micron, SK Hynix, and Samsung Electronics—are up 760%... From a long-term 'greed and fear' perspective, the bias remains to own DRAM makers. This is because computing demand can grow sustainably even if token costs collapse."

Shares of SK Hynix are scheduled to begin trading on the Nasdaq exchange on Friday.