Cathie Wood, CEO of Ark Invest, has explained why her firm is avoiding AI chip stocks that rely on memory components, instead favoring companies like Cerebras Systems and Groq. She argues that memory shortages driving prices higher are a warning sign, not a reason to invest.

The high prices are "not a normal state," Wood said on a podcast, detailing why Ark does not hold memory-related stocks. She described high-bandwidth memory as the most cyclical and easily commoditized segment of the semiconductor supply chain.

"This is the most cyclical, most commoditizable part of the semiconductor supply chain," Wood stated, pointing out that Cerebras and Groq, both backed by Ark's venture fund, are developing AI chips that do not require high-bandwidth memory. While she did not name specific companies, Samsung Electronics, SK hynix, and Micron Technology are the world's largest DRAM manufacturers, together controlling roughly 90% of global output.

She noted that price increases of threefold, fourfold, or even tenfold are "not normal" and should be interpreted as a negative signal rather than a positive one. Wood drew a parallel to Tesla's decision to engineer cobalt out of its battery designs to avoid supply chain bottlenecks, saying the chip industry is now "engineering its way out of high-bandwidth memory dependence."

This comparison echoes her earlier remarks that the industry is actively eliminating the need for high-bandwidth memory through technological design. On Tuesday, Ark sold $1.8 million worth of Advanced Micro Devices stock, following a $13.1 million divestment on Monday. Concurrently, the fund purchased approximately $7.7 million in Cerebras shares.

JPMorgan estimates that DRAM prices could rise more than 400% from the start of 2024 through the end of 2026, labeling the trend "chip inflation," which has already pushed up prices of everyday electronics. Chey Tae-won, chairman of SK Group, SK hynix's parent company, has described current memory prices as "abnormally high" and urged the industry to prioritize expanding supply over maximizing profits.

According to MS Hwang, a director at Counterpoint Research, despite Samsung, SK hynix, and Micron all ramping up production, meaningful supply relief is not expected until at least 2028. In June, Micron CEO Sanjay Mehrotra called memory a strategic asset for the AI era, noting that the company has signed agreements with 16 long-term customers, cumulatively worth approximately $100 billion in revenue through 2030.