Hanwha Investment Securities identified a buying opportunity in memory semiconductor stocks after Micron and SanDisk fell approximately 30% from recent peaks, with the Philadelphia Semiconductor Index declining 15% and major chipmakers NVIDIA and Broadcom dropping around 20%. The brokerage's analysis cited historical patterns showing semiconductor sector corrections typically conclude at -20% for indexes and -30% for individual stocks outside full bear markets, with technical indicators RSI and Stochastic now entering oversold territory. KB Securities attributed the recent correction to excessive concerns over profit growth rate slowdowns, noting that absolute profit levels continue rising even as growth rates naturally decelerate from elevated bases.
Technical Indicators Signal Oversold Conditions in Semiconductor Stocks
The Philadelphia Semiconductor Index's Relative Strength Index approached the oversold threshold of 30, while the Stochastic indicator entered oversold territory. RSI quantifies how quickly a stock price rises or falls over a set period, with readings above 70 indicating overbought conditions and below 30 signaling oversold states. Stochastic measures where the current price sits relative to the recent high-low range, with 0-20 considered oversold and 80-100 overbought. Micron's readings for both indicators moved into oversold zones. Han Sang-hee, researcher at Hanwha Investment Securities, stated that the attractive investment period extends at least one more quarter based on estimates from one year prior.
Historical Correction Patterns Show Limited Downside Outside Bear Markets
Hanwha Investment Securities analyzed past corrections excluding full bear market episodes like the COVID-19 shock in 2020, Federal Reserve tightening in 2022, and tariff shock in 2025. The report found that over the past 10 years, maximum drawdowns for the semiconductor sector reached -20% for indexes and -30% for individual memory stocks before corrections concluded, with limited additional declines when broader markets avoided bear territory. The current declines match these historical correction levels.
Analysts Forecast Continued Profit Margin Improvement Through Q4
KB Securities identified excessive worry over profit growth rate slowdowns as the core cause of the recent semiconductor correction. The brokerage noted that growth rate deceleration naturally occurs due to base effects when profits surge rapidly, and should not be interpreted as a peak signal. KB Securities cited SK Hynix patterns from 2013 and 2017, when EPS growth rates peaked but actual stock price highs formed approximately 10 months and 9 months later respectively, as absolute profit levels continued expanding despite slower growth rates. Current consensus estimates project semiconductor companies' profit margins will improve through Q4 this year, suggesting the sector has not yet passed its peak.
Cautious Views Emerge on Valuation and Earnings Trajectory
KB Securities emphasized that future investment decisions hinge on whether profit margins actually improve, noting that margin estimates change frequently and require ongoing monitoring. BNK Investment Securities set a target price of 1.85 million won for SK Hynix, below the current stock price, indicating limited upside potential despite positive sector expectations.
FAQ
What technical indicators show semiconductor stocks reached oversold levels?
The Philadelphia Semiconductor Index's RSI approached the oversold threshold of 30, and the Stochastic indicator entered oversold territory. Micron's readings for both indicators moved into oversold zones.
How much did major semiconductor stocks decline from recent peaks?
The Philadelphia Semiconductor Index fell 15% from its peak, NVIDIA and Broadcom dropped approximately 20%, and memory chip companies Micron and SanDisk declined around 30%.
