The memory-chip sector is prone to “vicious” boom-and-bust cycles and the problem may only worsen as Chinese companies ramp up capacity, according to Cathie Wood of ARK Investment Management LLC.

Wood, who became a household name by betting on disruptive innovation, told investors in Hong Kong that ARK avoids traditional memory-chip players because prices can fall quickly when supply outpaces demand.

Although high-bandwidth memory remains in tight supply for now, the entry of incremental Chinese producers threatens to disrupt pricing and amplify price swings across the sector, she said.

“The trend is up, but the cycles are vicious,” Wood said. If “you get a few more incremental competitors, especially out of China, the volatility will increase.”While South Korea’s SK Hynix Inc. and Samsung Electronics Co., alongside US-based Micron Technology Inc., dominate top-tier memory supply and HBM packaging, Chinese state-backed players such as CXMT Corp. have rapidly scaled DRAM output to grab market share. SK Hynix and Samsung’s shares have lost 51% and 36% from this year’s highs, respectively.

Separately, Wood said ARK is not as attracted to tech space in China as it is elsewhere, partly because the anti-involution measures are unable to mend the deflationary problem or shied the economy from deep property slump.

Wood also pushed back against the Broadcom Inc. CEO Hock Tan’s warning that the artificial intelligence trade has become speculative. She dismissed fears of a market bubble, expecting AI to boost productivity massively.