By Kurt Schussler

(Bloomberg) -- Shares of computer memory and storage makers slumped after Google researchers touted a new compression technique that could reduce the amount of memory needed for artificial intelligence workloads.

SK Hynix Inc., a key maker of memory chips for artificial intelligence applications, fell as much as 6.4% on the Korea Exchange. Flash memory manufacturer Kioxia Holdings Corp. dropped by a similar measure in Tokyo. That followed losses by Micron Technology Inc. and Sandisk Corp. Wednesday in New York.

Alphabet Inc.’s Google said its new TurboQuant technology can limit the amount of memory required to run large language models by at least a factor of six, reducing the overall cost of training artificial intelligence. Memory forms a vital part of Nvidia Corp.’s accelerators and demand has surged during the AI boom.

The Google news spurred some caution that memory needs may be reduced. Bulls tracking the blistering rally in global memory shares say that improved efficiency will actually increase rather than reduce demand, however, pointing to a theory known as the Jevons Paradox.

The 19th century premise was cited in a note from the trading desk at JPMorgan Chase & Co. Its analysts said that investors may take profits on the news, but there’s no near-term threat to memory consumption.

TurboQuant is positive for hyperscalers given the return on investment opportunity, Morgan Stanley analyst Shawn Kim wrote in a note. It also may be beneficial for memory makers longer term he added, as “a lower cost per token can also lead to higher product adoption demand.”

Memory and storage product prices have climbed in recent months amid shortages due to ravenous demand tied to the AI boom. That’s driven exponential moves in related stocks, such as Kioxia’s 700% surge since the end of August.

Some analysts pushed back on the idea of TurboQuant having negative implications for memory, referring to Jevons Paradox. Its a theory from an English economist about coal production stating that the more efficient technology becomes, the more demand will rise. The same idea was brought up last year when China’s low-cost DeepSeek AI model sparked fear of reduced need for more advanced technology.

The Google development may make “little difference to demand given the extreme supply constraints,” Ortus Advisors analyst Andrew Jackson wrote in a note on Smartkarma. For Kioxia, “after such massive gains it makes sense we see a bit of profit-taking creep in.”

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