As Samsung Electronics and SK hynix shares extend their surging rally, expectations of a long-term semiconductor super-cycle are being matched by growing concerns that a short-term peak may be near. Still, the prevailing view is that even if the sharp rise in memory prices moderates, profit margins will remain significantly higher than in past cycles. Brokerages have been raising target prices on upbeat earnings outlooks, while also warning of near-term overheating and a possible slowdown in the second half.
According to the Korea Exchange on Nov. 11, Samsung Electronics and SK hynix closed at 285,500 won and 1.88 million won, surging 6.33% and 11.51%, respectively, from the previous session. Amid an AI-driven semiconductor rally, funds have flowed heavily into the two stocks — since April, Samsung Electronics has posted daily gains of more than 5% on five occasions, and SK hynix on eight. Buoyed by the rally, Samsung Electronics Chairman Lee Jae-yong's personal stock holdings surpassed 50 trillion won, reaching 51.7 trillion won on the day.
While concerns over the pace of the rally are mounting by the day, most analysts see earnings-driven growth continuing for some time. JPMorgan said, "The memory supply-demand gap is expected to widen further next year, and customers are already pulling forward next year's demand due to fears of shortages," adding that "the memory upcycle will stay higher for longer." It cited expanding AI investment as structurally reshaping the memory sector and predicted AI-driven supply shortages would spread into price hikes across equipment, components, and memory.
Mirae Asset Securities also emphasized the possibility of a structural, long-term boom driven by expanding AI data center investment, noting that "hyperscalers such as CoreWeave, Google, and Amazon Web Services (AWS) have seen their order backlogs grow to tens of times their quarterly revenue." CoreWeave, an AI-focused cloud firm, reported first-quarter order backlog of $99.4 billion (about 146.3466 trillion won), up 48.8% from the previous quarter — roughly 50 times its first-quarter revenue. First-quarter order backlogs at Google Cloud and AWS also expanded to 23 times and 10 times their quarterly revenue, respectively. Analysts interpret the steady stream of large, long-term data center orders as enabling memory makers to sustain high profitability for an extended period, unlike in past cycles.
Some analysts argue semiconductor valuations remain undervalued. According to Hyundai Motor Securities, the 12-month forward price-to-earnings ratio (PER) of Korea's semiconductor sector stands at 5.17 times, well below the 20-year average of 10 times. The sector's 12-month forward net profit jumped 293% from 136.7 trillion won at the end of last year to 537 trillion won as of Nov. 8, but market capitalization rose only 135%, actually pushing the PER lower. Hyundai Motor Securities projected that the sector's PER could recover to at least 6.25 times once confidence in the sustainability of chipmakers' earnings grows.
Some analysts say memory demand could exceed supply through next year, ushering in what is effectively a "zero memory supply" era. Hyperscalers' AI capital spending is expected to surpass $1 trillion next year, while new memory production lines are not expected to come online in full force until 2028–2029. Lee Jin-woo, head of the Meritz Securities Research Center, said, "We are seeing the irony of PER falling as earnings rise," adding, "The semiconductor industry appears to be at a crossroads between being a cyclical market and one of structural growth."
On the other hand, some expect the semiconductor rally to slow slightly starting in the third quarter. Rising prices for general-purpose memory could dampen PC and smartphone demand, easing memory inventory shortages at OEMs. Kiwoom Securities noted, "In the third quarter, general-purpose memory prices are expected to rise only at a single-digit rate from the previous quarter," adding that "the surge in general-purpose memory prices is entering its final stage." BNK Investment & Securities also said, "Despite sharp earnings growth, the semiconductor cycle is entering its later stages," warning that "the second half must factor in a rising share of relatively lower-margin HBM4 and a possible moderation in memory price growth." Kiwoom Securities downgraded its rating on SK hynix from "Buy" to "Outperform," while BNK Investment & Securities cut its rating to "Hold."
Even so, most brokerages believe data center demand will offset the decline in PC and smartphone memory demand. Target prices were raised across the board on the day. Kiwoom Securities lifted its target price for Samsung Electronics from 260,000 won to 330,000 won, and for SK hynix from 1.3 million won to 1.9 million won. Mirae Asset Securities set its targets at 400,000 won for Samsung Electronics and 2.7 million won for SK hynix.
Baek Young-chan, head of the Sangsangin Securities Research Center, said, "There is a possibility that semiconductor sector profitability will moderate slightly starting in the third quarter, but the decline will be marginal, and even the reduced margins will be very high by historical standards." He added, "Not building data centers means staying permanently behind, so companies will have no choice but to keep expanding investment."
