Samsung Electronics Falls Sharply, but a Rebound Is Expected: "AI Investment Payback Is Getting Faster"

[Financial News] Samsung Electronics' stock plunged on concerns over rising U.S. long-term Treasury yields and a slowdown in artificial intelligence investment. However, analysts said the pace of AI investment monetization could ease the burden from higher rates. They pointed to the growing likelihood that major U.S. tech firms will recover their AI investment costs in less than three years, while cloud supply shortages may continue until 2028.
On the 20th, Kim Dong-won, head of research at KB Securities, identified AI investment monetization as a key variable in a report. He explained, "For investors, what matters more than rising interest rates is whether AI investment can absorb current rates and later turn into profits."

Samsung Electronics shares fell 10% over the two days from the 19th to the 20th, erasing all of this month's gains. The decline was attributed to higher financing costs for AI investments as U.S. long-term Treasury yields rose, along with concerns that big tech companies could scale back AI spending.
KB Securities said the recent concern over rising Treasury yields is more of a surface-level factor. As U.S. hyperscalers expanded AI investment this year, corporate bond issuance increased, and the U.S. 10-year Treasury yield is estimated to have risen by about 0.3 percentage points as a result. Since AI investment was one of the causes of higher rates, the firm said the speed of capital recovery matters more than the rate level itself.
The firm also said the chances of recouping AI investment have improved. Based on recent quarterly earnings calls from major hyperscalers such as Amazon.com, Inc., Google Experience Center, and Microsoft, KB Securities said the payback period for AI investment is increasingly likely to shrink to within three years.
Cloud demand is another factor supporting expectations for AI investment monetization. Most cloud facilities at major hyperscalers are effectively booked through 2028. KB Securities expects a demand deferral effect to continue at least until 2028, with unmet demand this year rolling into next year and next year's demand being pushed into 2028. The firm said supply is still failing to keep up with demand in cloud services, just as it has in memory chips.

If AI investment turns profitable sooner than expected, market concerns over higher funding costs are likely to ease, KB Securities said. It added that while rising U.S. Treasury yields increase the cost of financing AI investment, a faster recovery of invested capital could limit pressure on profitability.
KB Securities interpreted Samsung Electronics' recent stock correction as a decline driven by rate concerns rather than a deterioration in fundamentals. Since 2000, there have been four cases in which Samsung Electronics' share price fell more than 40% from a peak: 47% in 2008, 47% in 2022, 44% in 2024, and 49% this year. In the previous three cases, the stock rebounded one month, three months, and six months after bottoming out.

Large-scale shareholder returns were also seen as a potential catalyst for a future revaluation of Samsung Electronics' stock. KB Securities estimated that special dividends could exceed 100 trillion won at minimum, given Samsung Electronics' policy of using 50% of cumulative free cash flow from 2024 to 2026 for shareholder returns.

[email protected] Han Seung-gon Reporter