The biggest mover in overnight trading wasn’t Nvidia—it was memory stocks. On Gate perpetuals, SanDisk is now around 888, up about 6.4% over 24 hours, and Micron is around 731, up about 5.4%. SNXX, which is 2x long SanDisk, is up about 13%. Nvidia, by contrast, is down about 4.2%.

My conclusion: this move is a rebound after last week’s unjustified selloff, combined with money rotating into a different lane. It doesn’t mean the memory cycle has been validated all over again. Whales are still leaning bearish in the futures market, so anyone chasing the rally should know who’s on the other side of the trade.

Data is from around 23:20 tonight, Shanghai time, and is all from Gate perpetuals.

First, why are they rising.

Last Thursday, the Philadelphia Semiconductor Index fell about 12% in a single day. Micron dropped about 17%, and SanDisk about 22%. It started after the midterm elections, when the market grew concerned that tighter data center approvals and electricity prices would slow the buildout of computing capacity. But neither company’s books are in bad shape: Micron reported revenue of about $54.2 billion last quarter, and SanDisk about $11 billion, with both still issuing upward guidance. Today, Morgan Stanley raised its price targets for both, citing tight memory supply for another two to three years. TrendForce’s earlier forecast for fourth-quarter contract prices was a 10% to 15% increase for conventional DRAM and 15% to 20% for NAND. Apple also complained on its November 2 earnings call that memory price increases were unprecedented. On top of that, the weekend’s Nvidia CEO controversy left Nvidia taking the hit on its own, as money rotated out of it and into other chip stocks. The fundamentals haven’t changed; what’s changed is that panic has faded and money has rotated.

So who’s taking the other side? Let’s look at three sets of data.

First, price and volume. SanDisk’s 24-hour low was around 791 and its high around 892, a range of more than 12%, with volume of about 183 million U. Micron’s low was around 663 and its high around 735, with volume of about 47 million U. This was a move from the bottom to the top overnight—not a slow climb.

Second, open interest and long/short positioning. SanDisk’s open interest in notional terms rose from about 267 million U to about 276 million U over 24 hours, an increase of only around 3%. The long/short ratio by account fell from about 6.1 to about 3.7, which means the share of accounts holding long positions is shrinking. The large traders’ long/short ratio by position size was about 0.59, meaning large traders held heavier short positions. Micron showed a similar pattern: open interest rose from about 72 million U to about 80 million U, and the large traders’ ratio by position size was about 0.82—also skewed bearish.

Third, liquidations and a comparison. Over the past 24 hours, about 880,000 U in SanDisk long positions were liquidated, compared with only about 70,000 U in shorts. Even though the price rose 6%, more longs were liquidated, suggesting that the price first swept down to liquidate longs overnight before moving back up. For comparison, Nvidia’s open interest in notional terms surged from about 62 million U to about 95 million U, an increase of more than 50%, while its price fell. That’s where the battle over capital is happening.

So my view is that this leg up in memory stocks is mainly driven by covering and rotation in U.S. equity spot markets. Retail longs in the futures market have already been shaken out once, while large traders holding shorts still haven’t given in. The upside is that there are still shorts above that could be squeezed; the downside is that moves like this can come and go quickly.

Let’s be clear about what would invalidate this view. If SanDisk falls back below 835, around last Friday’s U.S. market closing price, then tonight’s move will have been just another spike followed by a pullback. The same applies if Micron falls back to 690, last Friday’s closing price. On the other hand, if open interest keeps rising and the large traders’ long/short ratio climbs back above 1, that would show that big money is starting to buy into this recovery, and I’d change my view.

Watch for three signals next. First, TSMC reports its October revenue on Tuesday—does demand from the AI compute supply chain show signs of weakening? Second, Nvidia’s earnings report on November 17: its guidance on capital expenditure will determine the ceiling for memory orders. Third, SanDisk’s 1-for-8 stock split takes effect on November 19. Keep an eye on announcements about how futures contracts will handle the price adjustment, and don’t let the numbers spook you.

Here’s a recent example that fits the pattern. During U.S. trading last Friday, SanDisk was up about 10% at one point, reaching around 883, but it eventually closed at about 835, giving back a big chunk of its gains. Tonight it’s back above the 880 area. It’s testing the same level for a second time, and whether it can hold matters more than how much it’s risen. Also, the view at this morning’s Matrix meeting was that the weekend sell-off in high-beta stocks was profit-taking, not new negative news. SOXL was around 43.6 then and is now around 53.6, so that call was right.

One last question: memory price increases are showing up in earnings reports, yet large traders are leaning short in futures. Who do you think has it wrong?