Google(GOOGL.US)compression technology triggers a "seismic" shift in storage chips, analysts invoke the Jevons paradox: don't panic, demand will only grow

Bloomberg News reports that due to Google (GOOGL.US) researchers promoting a new compression technology, market concerns about demand have been triggered, causing a sharp decline in computer memory and storage product stocks. However, this impact may only be a short-term disturbance rather than a survival threat.

In the Korean exchange market, AI application key storage chip manufacturer SK Hynix temporarily fell 6%. In the Tokyo market, NAND flash manufacturer Kioxia Holdings dropped 4.4%. Previously, Micron Technology and SanDisk also experienced similar declines on Wednesday in the New York market.

Google stated that its new TurboQuant technology can significantly reduce memory usage for large language models and vector search engines. However, bullish investors optimistic about the strong rally in global storage chips believe that efficiency improvements may actually increase rather than decrease demand—an old theory known as the “Jevons Paradox.”

JPMorgan’s trading division cited this 19th-century theory in a report. The bank’s analysts said that investors might take profits based on this news, but memory demand does not pose a threat in the short term.

Driven by the booming demand from the AI craze, memory and storage product prices have continued to rise over the past few months due to supply shortages, leading to exponential gains in related stocks, such as Kioxia, which has surged 700% since late August last year.

Google’s news has sparked market caution about potential demand decline, but some analysts counter that the actual situation is quite the opposite.

The Jevons Paradox originates from a theory by a British economist regarding coal production, which states that increased efficiency can lead to higher demand. When China’s low-cost AI model DeepSeek raised concerns last year about declining demand for advanced technology, this theory was also mentioned.

Ortus Advisors analyst Andrew Jackson wrote in a report on the Smartkarma platform that, considering the “extreme supply tightness,” Google’s technological breakthrough has “little impact” on demand. For Kioxia, “after such a significant rally, some profit-taking is reasonable.”