Samsung Electronics and SK hynix at historic lows ... overreacting to political uncertainty

[Financial News] Meritz Securities said the sharp declines in Samsung Electronics and SK hynix shares reflected an excessive reaction to political uncertainty rather than damage to memory demand. The analysis said that even if uncertainties arise for data center projects in the United States, investment could shift to other locations, and the two companies’ shares have reached valuations near historic lows.
Kim Sun-woo, a researcher at Meritz Securities, said on the 6th, “After reviewing the Americas sales and marketing channels of memory makers including Samsung Electronics, SK hynix and Micron Technology, we have detected no signs of unusual changes in demand at this point.”
Kim said that with demand for 2027 already secured, even if demand from some customers fluctuates in 2028, other customers are highly likely to absorb all of that volume. He said short-term share-price movements should be viewed separately from actual memory demand.
He also said that various factors would come into play before data center projects could be blocked even in U.S. states that have elected Democratic governors. The effects on local economies and employment would have to be considered, and it would also take time to enact the relevant policies into law.
He also raised the possibility that data center investment could move to other locations. Over the medium to long term, construction sites could shift to other U.S. states beyond Texas, New York, Georgia and Oregon, or to regions such as the Middle East, Southeast Asia and the Far East. Kim said, “Meta and Microsoft, among others, have already begun considering data center construction outside the United States,” adding that “the uncertainty is less about ‘declining demand’ and more about the ‘path’ resulting from relocation.”
He judged that the sharp share-price declines had also greatly eased valuation concerns. The intraday share prices used in the report were 185,000 won for Samsung Electronics and 1.13 million won for SK hynix. Based on these prices, their projected 2027 price-to-book (P/B) ratios were calculated at 1.13 and 1.00, respectively.
Kim said the current situation was similar to the period from late 2024 to early 2025, when Samsung Electronics shares reached 50,000 won, equivalent to a P/B ratio of 1. He judged that, given the cyclical nature of the memory industry, investors’ expectations at current levels are more likely to be directed toward future share-price gains.
He said, “Basically, the sharp decline in share prices is an exaggerated reaction to the ‘political language’ at the heart of AI competition,” adding, “A comparison of potential risks and returns shows a situation overwhelmingly tilted toward returns.” 
Meanwhile, Samsung Electronics closed at 189,700 won, down 5.86% from the previous day, while SK hynix closed at 1,151,000 won, down 113,000 won (8.94%). 
[email protected] Joo Won-gyu Reporter