Alphabet Inc. Class C (GOOGL.US) The new algorithm triggers a "storage heat cooling panic" but Wall Street analysts are not panicking.

Google's research team announced a breakthrough new algorithm for AI memory compression, causing global memory stocks to plummet. This decline continued to expand on Thursday and Friday. However, Wall Street analysts still remain optimistic. Global chip stocks continue to bleed In the South Korean stock market, storage giant Samsung Electronics fell 4.71% on Thursday and continued to fall 3.16% on Friday morning; SK Hynix fell 6.23% on Thursday and continued to fall nearly 5% on Friday morning. In the Japanese stock market, Kioxia Corporation fell 5.7% on Thursday and plunged 7.18% on Friday morning. In the US stock market, Micron Technology, Western Digital, and SanDisk all saw significant declines on Thursday after a drop, with declines of 6.9%, 7.7%, and 11% respectively on Friday. In recent months, shares of memory chip companies have been soaring due to major tech giants investing heavily in AI infrastructure, leading to a shortage of memory supply, resulting in significant increases in memory prices and profits. As of Wednesday this week, SK Hynix and Samsung's shares have soared more than 50% this year, while Kioxia, which has a poor long-term performance, has even more than doubled its share price. However, Google's technological breakthrough with the TurboQuant compression algorithm has disrupted this prosperous situation. Google's new compression algorithm, TurboQuant, is said to reduce the cache memory usage of large language models during runtime by at least 6 times and improve performance by 8 times. Industry experts believe that Google's new technology may help alleviate the shortage of memory supply and potentially lower memory prices. Wall Street collectively optimistic Unlike the sharp sell-off in the stock market, Wall Street analysts have expressed optimism in their analysis reports. Morgan Stanley analyst Shawn Ki wrote in the report that Google's research should have a more positive impact on the industry because it addresses a key bottleneck - it improves the efficiency of the so-called critical value cache used for inference (running artificial intelligence models). He wrote, "If models can significantly reduce memory requirements without sacrificing performance, the cost of serving each query will be significantly reduced, enabling more profitable AI deployments." Morgan Stanley's Ki wrote that the release of TurboQuant is a positive for large enterprises given the opportunity for return on investment. In the long run, this may also benefit memory manufacturers, as "a decrease in unit cost can also lead to higher product adoption demand." Like many "optimists" in the AI industry and analyst community, he referred to the theory known as the "Jevons Paradox". This economic theory refers to a counterintuitive relationship between technological progress and resource consumption, defined as: when technological progress improves efficiency, resource consumption not only does not decrease, but actually increases. JPMorgan Chase and Citigroup also referenced this theory. JPMorgan Chase analysts stated that, although some investors may take profits from this news, memory demand will not be threatened in the short term. Andrew Jackson, an analyst at Ortus Advisors, bluntly stated, "Given the current extremely tight memory supply, Google's new algorithm may have minimal impact on memory demand." This article is reprinted from Caixin Media, edited by GMTEight: Chen Wenfang.