Why The Market’s ‘Suckening’ Could Only End When Memory Prices Stop Rising

The markets took a hit this June, dubbed the ‘great suckening,’ with tech giants like Google and Microsoft bearing the brunt. But why is this downturn dragging on—and what could signal its end? The answer might be tied to an unexpected culprit: skyrocketing memory prices.

What Exactly Is the Market’s ‘Suckening’?

June marked a clear peak and subsequent slump for major tech stocks, a phase widely termed the ‘great suckening.’ Notably, Google, Microsoft, and Meta have all faced downward pressure, while Apple has managed to hold momentum largely by avoiding reckless spending. Though the major indices hover near all-time highs, underlying weaknesses are creeping in, especially in the Nasdaq 100, which has been making lower highs and lows.

Examining Google’s stock dynamics highlights this tension well. After a strong run culminating in a high near $381, Google announced a massive $80 billion equity raise, backed by Berkshire Hathaway’s Gregory Abel, who bought in at around a 7-8% discount. This fundraising marked a clear pivot point, coinciding with the stock’s peak and eventual decline. Yet only about half of that raised capital has hit the market so far, suggesting more supply pressure lies ahead.

Capex and Capital Raises: The Struggle Beneath the Surface

The problem extends beyond stock prices. Companies leading the AI race are spending heavily, often at a loss. Microsoft admitted that approximately 25% of its capital expenditures stemmed from rising memory costs—crucial for AI development. Google, going cash flow negative, had no choice but to tap into the raised capital. Meta, too, faces intense spending pressures.

Interestingly, Apple has stayed relatively steady. Without extravagant AI-related spending, Apple’s stock has gained about 18% year-to-date, while Microsoft, Google, and Meta lag or decline.

Memory Prices: The Hidden Driver of Market Pain

A detailed take came from a subscriber’s insight linking the tech slump to soaring memory prices. For example, Micron’s memory chip prices surged 370% year-over-year last quarter. The driver? AI demands for bigger context windows that allow models to ‘remember’ more data simultaneously—improving performance without actually making the AI smarter.

This means the rapid gains in AI efficiency are due to better memory capacity rather than fundamental intelligence improvements. High-bandwidth memory stacks chips vertically, allowing faster access but at a steep cost. This has created a vicious cycle causing hyperscalers like Google and Microsoft to keep hiking capital spending just to keep up with AI demands.

When Could This Market Squeeze Ease?

The theory goes that the market’s downward pressure will last until memory price growth plateaus. Not necessarily a price drop, but a halt to the astronomical percentage increases seen lately. When memory prices stop their steep climb, hyperscalers may no longer need to drastically increase their capex just to maintain AI momentum.

That could mark the inflection point for stocks like Google and Microsoft to stop falling and resume growth. Mark Zuckerberg’s recent comments about monetising excess AI compute capacity have already sparked optimism, indicating Wall Street’s appetite for profitable AI growth, not just heavy spending.

This insight offers a valuable lens on the current market turmoil, pointing investors to watch memory prices as a possible early signal that the ‘suckening’ phase is nearing its end.