The memory market has been scorching hot, and one new exchange-traded fund (ETF) dedicated to the sector that was introduced on April 2 has already more than doubled its value. That ETF is the DRAM – Roundhill Memory ETF (NYSEMKT: DRAM), which is the first-ever memory ETF. The question, though, is whether the ETF is still a buy after its strong performance in such a short period of time.

The ETF's holdings are largely dominated by the big three DRAM makers: Micron Technology (NASDAQ: MU), SK Hynix, and Samsung. Together, the three stocks make up more than 73% of the fund's portfolio. The DRAM market has seen soaring prices, as demand for high-bandwidth memory (HBM), a special form of DRAM that is packaged with graphics processing units (GPUs) and other AI chips, has been surging. The entire DRAM market is supply-constrained, which is only exacerbated by HBM requiring upwards of three times the wafer capacity of ordinary DRAM.

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The supply demand dynamics of the DRAM market have led the big three players to see their revenue skyrocket and gross margins balloon. Despite their growth, their stocks remain cheap, as the industry has historically had very large boom-and-bust cycles. However, all three have begun signing longer three- to five-year deals for HBM for the first time, marking a big shift to the notoriously short-term deals the industry typically operates under. This should increase visibility and reduce some of the cyclicality of the DRAM business, while helping place a higher floor on it.

Notably, the ETF at times uses leverage and total return swap derivatives to take positions, as it did early on with Micron. This can add some additional volatility and risk; however, not to the extent of a leveraged ETF, and it is done mainly for tax purposes and as a way to get more exposure to a stock. Roundhill does offer a separate leveraged version of the ETF called the Roundhill T-REX 2X Long DRAM Daily Target ETF (NYSEMKT: RAM) for investors looking for that type of leverage, but it is highly risky.

A great way to get international memory exposure

One of the nice things about the DRAM – Roundhill Memory ETF is that it gives investors exposure to international memory names. Generally, most U.S. investors who want exposure to the DRAM market just invest in Micron, while those interested in the NAND (flash) market invest in Sandisk.