Semiconductor ‘pessimism’ is overdone... time to invest in Samsung Electronics and SK hynix

[Financial News] SK Securities has issued a report maintaining its “overweight” recommendation on the semiconductor sector, saying excessive pessimism about memory market conditions is reflected in the share prices of Samsung Electronics and SK hynix. The analysis is that growing demand for artificial intelligence (AI) and long-term supply agreements (LTAs) are improving earnings visibility.
On the 21st, Han Dong-hee, an analyst at SK Securities, said, “Based on estimated earnings for the next 12 months, the price-to-earnings ratios (PERs) of Samsung Electronics and SK hynix are around 3.5x and 2.8x, respectively, and have fallen below the historical lows of previous downcycles.” He assessed, “The market appears to be assuming the start of a sharp earnings decline cycle after 2028, but that is excessive pessimism given strong AI demand and a deepening shortage of memory supply.”
He said memory demand in the AI era differs in nature from past demand centered on PCs and mobile devices. Han said, “The increase in inference demand as AI agents become more widespread, along with the adoption of continual learning, requires all types of memory and is one of the key rationales for expanding infrastructure.” He analyzed, “Because supply is physically constrained, it is harder than in the past to quickly ease excess demand when demand is repeatedly reassessed.”
He also cited long-term supply agreements as a factor that reduces volatility in market conditions. If a customer breaches a contract, it may be pushed to the back of the queue for volume allocation in the next cycle or have to accept less favorable terms. The cost of breaching a contract is high, he said, especially considering that a failure to secure supply could delay a company’s response to AI demand and erode its competitiveness.
He forecast, “Despite falling exchange rates, we are again raising our 2027 earnings forecasts for Samsung Electronics and SK hynix, thanks to memory prices coming in above expectations.” He added, “Their third- and fourth-quarter earnings announcements will demonstrate the resilience of AI memory to economic cycles.”
He added, “As big tech companies reaffirm AI growth prospects and investment plans in their October-November earnings announcements, extreme concerns about the sustainability of capital expenditure will begin to ease.” He continued, “We maintain our view that now is the right time to buy memory.”


[email protected] Joo Won-gyu Reporter