'Samsung Electronics and SK hynix Have Rallied Too Much': Warning Signs Emerge Amid AI-Driven Memory Boom

[Financial News] Fueled by the Artificial Intelligence (AI) boom, memory semiconductor makers such as Samsung Electronics and SK hynix are enjoying a record-breaking upswing. However, warnings are also emerging that the industry's signature boom-and-bust cycle could repeat.
On the 25th local time, U.S. business media outlet CNBC reported that "the recent outsized gains in memory-related stocks have driven the rally in U.S. and South Korean markets, but market experts warn that it is dangerous to forget the sector's cyclical nature."
Samsung Electronics and SK hynix have surged 114% and 186%, respectively, so far this year. Micron and SanDisk Corporation in the United States have also posted gains of more than 140%. CNBC noted that the rally has been driven by the belief that "the memory industry has shed its old cyclical pattern." Executives have argued that AI has overturned the industry's long history of booms and busts.
Investors, however, are taking a more cautious view.
William de Gale, portfolio manager at asset manager Blue Box, told CNBC that "the memory industry tends to go through huge swings" and warned that it is "a pretty terrible industry over the long term." He added that whenever claims emerge that "the memory cycle is gone and the sector is now a long-term value creator," the market eventually turns sharply lower.
John Cunliffe, head of investments at asset manager JM Financial, also said current share prices are based on the optimistic assumption that "high margins and strict industry-wide supply controls will remain in place for a long time." He added that with concentration becoming more pronounced over the past few weeks, the market has become vulnerable to a correction. Speaking to CNBC, he said that if AI demand grows at a normal pace, production could rise meaningfully over the next three years, easing supply constraints.
Some analysts say overheated memory stocks are also increasing risks across the South Korean stock market. Samsung Electronics and SK hynix now account for more than 50% of the KOSPI Composite Stock Price Index (KOSPI). In this regard, Steve Brice, global CIO at Standard Chartered, said on the 13th that "optimism about the South Korean stock market is nearing its peak" and advised investors to take profits in Korean stocks and diversify into a Global Portfolio.
whywani@fnnews.com Hong Chaewan Reporter