South Korean semiconductor stocks face peak-out debate as analysts adjust expectations following recent market volatility. On July 10 at the Nasdaq ADR listing ceremony in New York, SK Group Chairman Choi Tae-won defended AI sector growth potential amid bubble concerns, while Morgan Stanley and domestic securities firms issued cautious outlooks on memory chip makers Samsung Electronics and SK Hynix. The debate centers on whether slowing earnings growth momentum signals sector peak or temporary deceleration. Semiconductors' dominant weighting in Korean indices makes the peak-out question critical for overall market direction, with conflicting interpretations dividing analysts between AI bubble warnings and sustained cycle arguments.
SK Chairman Defends AI Growth at July 10 Nasdaq Event
SK Group Chairman Choi Tae-won stated "AI is still 5 years old" when meeting Korean reporters after the SK Hynix ADR trading opening bell ceremony on July 10 in New York. Addressing AI bubble concerns, Choi said "In the AI era, memory chip demand is increasing exponentially. There is always overshooting like overheating or cooling in the stock market. You could call this an AI bubble, but this is just a market phenomenon, and AI technology itself is still immature and incomplete, but real."
Choi's comments acknowledged bubble debate while reaffirming his view that AI industry's structural growth remains valid and semiconductor demand will expand long-term. Market attention has increasingly focused on whether the semiconductor sector has passed its peak, with Samsung Electronics and SK Hynix share price direction serving as key variables determining overall KOSPI movement given semiconductors' absolute weight in domestic indices.
Morgan Stanley and Domestic Analysts Lower Semiconductor Targets
Morgan Stanley issued cautionary views on the memory semiconductor sector, stating the "narrow rally" centered on semiconductors is entering a closing phase. The investment bank recommended reducing short-term holdings in memory chipmakers Samsung Electronics, SK Hynix and Micron while shifting funds to US big tech hyperscaler companies. Morgan Stanley's core reasoning cited slowing momentum in earnings estimate upgrades, analyzing that while continuous earnings forecast increases drove semiconductor share price gains, profit growth pace will likely decelerate ahead, potentially signaling peak share prices.
BNK Investment Securities maintained a "HOLD" rating on SK Hynix this month with a 1.85 million won target price, citing as a key variable that global big tech companies leading AI infrastructure investment may not expand capital expenditures as much as market expectations. Kiwoom Securities lowered Samsung Electronics' target price from 430,000 won to 390,000 won. Kiwoom stated "In the second half, amid slowing earnings per share growth rate, contradictory factors will work simultaneously - expectations for next-generation HBM4 and enterprise SSD market share expansion, and pursuit by Chinese memory companies - increasing share price volatility." The firm explained it lowered the target price while adjusting some long-term memory forecasts.
Analysts Argue Semiconductor Cycle Continues Despite Slowdown
Hana Securities evaluated current semiconductor share price declines as a normal repricing process following gains rather than the start of a bear market. Kim Du-eon, Hana Securities researcher, analyzed "This is a process where price and supply-demand find balance again after the first rise. The direction of semiconductor profits has not yet turned."
The explanation characterizes the sector as passing through a growth rate peak rather than the end of growth itself. Analysis of World Semiconductor Trade Statistics Organization (WSTS) forecasts suggests this year may mark the peak of semiconductor industry growth rates, but not the peak of absolute sales and demand scale. Next year's growth rate may be somewhat lower, but market scale itself will continue expanding as AI server and high-performance memory demand growth continues.
Kim Dong-won, KB Securities researcher, explained "Recent Samsung Electronics share price adjustment resulted from concerns about AI investment sustainability surrounding Meta's data center rental plans, combined with peak debate over Samsung Electronics' second-quarter earnings." He continued "Meta CEO Zuckerberg mentioned in a Bloomberg interview that no one in the AI industry would feel computing resources are sufficient," emphasizing "2027 is expected to see the tightest supply in 70 years of semiconductor history."
FAQ
What does semiconductor peak-out debate mean for Korean stocks?
The peak-out debate centers on whether slowing earnings growth momentum in Samsung Electronics and SK Hynix signals the semiconductor sector has passed its peak or represents temporary growth deceleration. Given semiconductors' dominant weighting in Korean indices, this question critically affects overall KOSPI market direction, with analysts divided between viewing current conditions as AI bubble warnings versus sustained cycle arguments.
Why did Morgan Stanley and domestic securities firms lower semiconductor targets?
Morgan Stanley cited slowing momentum in earnings estimate upgrades as core reasoning for recommending reduced memory chip holdings. Domestic firms adjusted targets based on specific factors: BNK Investment noted big tech capital expenditure may not expand as expected, while Kiwoom Securities pointed to slowing EPS growth rates and contradictory factors including HBM4 market share expectations and Chinese competitor pursuit affecting Samsung Electronics' outlook.
What did SK Chairman say about AI industry growth on July 10?
At the SK Hynix ADR listing ceremony on July 10 in New York, SK Group Chairman Choi Tae-won stated "AI is still 5 years old" and said "In the AI era, memory chip demand is increasing exponentially." Addressing bubble concerns, Choi acknowledged market overshooting exists but emphasized "AI technology itself is still immature and incomplete, but real," defending the view that structural AI growth and long-term semiconductor demand expansion remain valid.
