Persistent memory chip supply constraints through 2028 fuel outlook
Despite wild swings in the Kospi, brokerages are doubling down on Korean chip stocks, betting the AI-driven memory boom has much further to run.
The benchmark index has seesawed in recent sessions, with chip heavyweights Samsung Electronics and SK hynix at the center of the turbulence as investors reassess the outlook for AI demand.
On Wednesday, the Kospi closed at 5,735.66, up 3.29 percent from the previous session. Samsung and SK hynix each surged more than 7 percent intraday, helping trigger a five-minute buy-side sidecar. The rebound followed last Thursday's 7.57 percent plunge, which triggered a 20-minute marketwide trading halt.
Yet analysts remain largely unfazed by the volatility.
In a report Monday, Nomura maintained its bullish outlook for memory chips, forecasting supply bottlenecks through at least 2028 and naming Samsung and SK hynix as its top picks.
The brokerage reiterated its "buy" ratings and price targets of 670,000 won ($505) for Samsung and 4.7 million won for SK hynix — roughly three times and 3.6 times their respective Wednesday closing prices of 223,500 won and 1.294 million won.
Nomura also dismissed market concerns over reports that China's largest DRAM maker, ChangXin Memory Technologies, plans to introduce next-generation server memory by year-end, calling the reaction "excessive."
"The market is underestimating both the breadth of AI demand and the earnings that such strong demand can generate across the value chain," the report said.
"Our investment thesis rests on continued data center deployment and associated memory requirements."
JPMorgan struck a similarly optimistic tone earlier this month, maintaining its "overweight" ratings on Korean and Taiwanese equities. The US investment bank expects AI-related stocks to continue driving Asian market gains next year, extending this year's rally.
JPMorgan also projected tight supply-demand conditions through 2028, saying they would give Asian firms "significant pricing power to go with volume growth," pushing net income across the ecosystem above $1 trillion.
"It remains important to be open-minded about the extent of AI upside," the bank added.
Korean brokerages share that confidence, arguing that sustained AI demand is making the memory industry less vulnerable to traditional boom-and-bust cycles.
"The nature of memory demand in the AI era is different from what it was in the past," said Han Dong-hee, an analyst at SK Securities, in a report Wednesday.
"Memory demand was previously driven by mature industries such as PCs and mobile devices, making it cyclical in nature. But with AI emerging as a new source of demand, the industry's sensitivity to economic cycles has weakened significantly."
Mirae Asset Securities also maintained its "overweight" rating on the semiconductor sector Monday, keeping its price targets unchanged at 400,000 won for Samsung and 3.1 million won for SK hynix.
"We continue to see extremely resilient AI demand, with no signs of a slowdown," said Kim Young-gun, an analyst at Mirae Asset Securities.
"Rather than taking an excessively pessimistic view, investors should place greater confidence in the optimistic outlook offered by leading players."
silverstar@heraldcorp.com
