Samsung reasserts clout as top South Korean stock on AI catch-up hopes
Its shares are up 10 per cent in July, while those of smaller rival SK Hynix have dropped nearly 8 per cent. Samsung has accounted for more than a third of this month's gain in Korea's Kospi, the world's best-performing major equity index this year.
'In the past one month, we noted growing interest from investors on Samsung's comeback in the high-bandwidth memory (HBM) market,' JPMorgan Chase analyst Jay Kwon wrote in a Jul 8 note. 'We see Samsung R&D progress moving in a positive direction.'
The market is betting on further gains in Samsung shares, which have seen a net inflow of about US$1.2 billion in July, while those of SK Hynix have notched an outflow of more than US$200 million. Meanwhile, short interest in Samsung has retreated over the past few months as bearish wagers on SK Hynix climbed.
Samsung has long dominated Kospi, with its current 15 per cent weighting still about double that of hard-charging No 2 SK Hynix. Yet SK Hynix shares have been the biggest index driver over the past two years, as investors cheered its early jump in the supply of HBM memory to work with Nvidia's AI processors.
Leadership in HBM is unlikely to change in the near term, with SK Hynix unveiling plans for more spending on additional capacity as it reported record earnings on Thursday (Jul 24). Investors are anticipating that things will start to turn around for Samsung however, driving gains in its stock since it posted a profit decline earlier this month.
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'The preliminary results were bad, but the shares didn't fall, that's what a bottom looks like,' said Marcello Seongsoo Ahn, a portfolio manager at Quad Investment Management. 'The equity market is always six months ahead, meaning the tipping point of the stock price is maybe now.'
All eyes are on the next generation of AI memory, with SK Hynix and US-based Micron Technology having already shipped samples of their HBM4 chips to customers. Analysts are increasingly touting prospects for Samsung to catch up sometime in the next year or two, with approvals from Nvidia being the key point to watch.
SK Hynix's shares fell 1.3 per cent on Friday even after reporting record earnings for the June quarter, as analysts cautioned about intensifying competition in the HBM market.
Sanford C Bernstein analyst Mark Li estimates SK Hynix has a 57 per cent share of the overall HBM market in 2025, followed by Samsung at 27 per cent and Micron at 16 per cent. By 2027, he sees the two Korean chipmakers holding 38 per cent each and Micron trailing at 24 per cent.
A sign of caution for the overall industry was flagged by Goldman Sachs when it downgraded SK Hynix last week, on a forecast decline in HBM pricing next year, in addition to gains by competitors. Other risks include geopolitical tensions and tariffs, as well as possible new market entrants from China, much further down the line.
There are other positive catalysts as well, including the outlook for Samsung's smartphone business, as well as its efforts to improve governance and raise valuations. Jay Y Lee, executive chairman and grandson of the group's founder, has survived legal challenges and is gradually shuffling management.
'It's interesting to see the changes that are going on at Samsung,' including its progress with Nvidia, said Tim Campbell, chief executive officer and managing partner of Edinburgh-based Baillie Gifford. There has also been a move towards loosening the founding family's grip, and 'that could be exciting if they manage to do that'.
The company's detailed second-quarter earnings report is due on Jul 31. BLOOMBERG
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