The Shadow of the Semiconductor Peak Theory Looms; Brokerages Point to This Period

[Financial News] As a correction in the domestic stock market has continued, led by semiconductor shares, concerns are emerging that the AI semiconductor industry may have already reached its peak. Brokerages said it is still too early to conclude that a peak has been hit, and they expect the semiconductor industry to remain in an earnings upcycle through the end of the year.
According to the Korea Exchange on the 27th, among the 36 KRX indices this month, excluding the K-Sharp Index, the weakest performer was the KRX SK Hynix Index, which fell 33.62% over the period. Other semiconductor-related indices also ranked near the bottom, including the KRX Information Technology Index (-30.52%), KRX 300 Information Technology (-30.2%), KRX Semiconductor Index (-30.12%), and KRX Samsung Electronics Index (-25.30%).
While the broader domestic market has entered a correction phase, semiconductor shares have seen even steeper declines. Over the same period, the KOSPI (Korea Composite Stock Price Index) and KOSDAQ (Korean Securities Dealers Automated Quotations) fell 21.07% and 18.33%, respectively.
Brokerages say the stocks have given back much of this year’s gains after rising sharply earlier in the year. They also note that the pullback has been amplified by concentrated inflows into single-stock leveraged exchange-traded funds (ETFs), margin trading, and foreign investor flows. In the first half of this year, the KRX Semiconductor Index had surged 181.81%.
Lee Jae-won, a researcher at Yuanta Securities Korea, said, "The concentration of funds in semiconductors and large-cap stocks in the first half was reasonable given their earnings share and visibility." He added, "But because the rally was driven by individual investors buying leveraged ETFs and using credit, while foreigners sold large-cap stocks, the same flow structure has worked in reverse after the share prices fell."
Brokerages are viewing the end of the year as the peak of the semiconductor earnings cycle. Rather than a collapse in the earnings cycle, they expect earnings growth to slow. Since the industry has already posted sharp profit growth since last year, year-over-year growth rates are likely to ease.
Lee Eun-taek, a researcher at KB Securities, said, "One reason for the recent market correction is a slowdown in the pace of earnings growth, and that concern is partly justified." He added, "But in a phase like the current one, where earnings are surging, the base effect is very strong. If the semiconductor supercycle began after July last year, it is natural for this year’s earnings growth rate to peak."
He continued, "Based on analysts’ estimates, the fourth quarter will be the peak for operating margin." He added, "Micron already posted an operating margin of 80.4% in the second quarter of this year, and it guided for a gross margin of 86% in the third quarter. That suggests the third-quarter operating margin could rise to around 82%."
Still, he said the market has not yet shifted into a sharp downtrend. "Recent indicators such as semiconductor orders and inventories show a slight decline, but it does not appear likely that the sector will enter a meaningful downtrend yet," Lee said. "For now, economic indicators are likely to remain in a Goldilocks-like range, neither too hot nor too cold. In short, we need to confirm whether operating margins and leading macro indicators are slowing together."

[email protected] Lim Sang-hyeok Reporter