Samsung Electronics and SK Hynix stocks saw their 12-month forward price-to-earnings ratios fall to 4.8x and 5.3x respectively, reaching historical lows, according to an LS Securities report released on the 9th. Analyst Hwang San-hae attributed the valuation compression to simultaneous stock price declines and upward earnings revisions. The analyst cautioned that despite apparent valuation appeal, the discount structure characteristic of AI cycle leaders and earnings re-evaluation distortions make these metrics insufficient grounds for increasing portfolio weightings in these Korean stocks.
LS Securities Analyst Warns Against Additional Purchases Despite Low PER
LS Securities found that Samsung Electronics and SK Hynix valuations reached historical low ranges following recent sharp stock price declines. Hwang San-hae stated in the report that while valuation merit appears highlighted, the unique discount structure of AI cycle leaders and valuation errors occurring during rapid earnings re-evaluation periods make these insufficient arguments for further weighting expansion. The analyst emphasized that investors should consider the discount structure inherent to AI cycle characteristics and distortions in the earnings re-evaluation process rather than increasing purchase positions based solely on numerical metrics.
Memory Semiconductor Firms Face Supply Expansion and Bottleneck Variables
Big tech companies currently leading the AI cycle, including Alphabet and Meta, face dual burdens of increasing capital expenditures while lowering technology unit prices to secure profits to avoid falling behind in the cycle. Hwang assessed that semiconductor companies benefiting from this trend must also rush to expand memory supply in a bottleneck state before the overall AI cycle turns. The analyst noted that memory semiconductors returning to investment and supply-dependent cyclical industry status represents another factor causing hesitation in weighting expansion. Hwang projected that if AI intermediate material companies' profits grow excessively, hyperscalers' capacity to sustain investment could also waver. The analyst stated that Samsung Electronics and SK Hynix operating profit surged to 57% of hyperscaler capital expenditure levels, higher than past Nvidia bottleneck levels. Memory bottlenecks delaying device replacement cycles were cited as another reason for caution in weighting expansion, with Hwang noting that while memory benchmarks needed for practical AI utilization show steady upward trends, simultaneous memory bottleneck phenomena pressure device markets and fundamentally delay AI proliferation.
Analyst Identifies Valuation Trap Pattern in Historical Tech Stock Cases
Hwang characterized the current period as when markets verify the sustainability of profit levels and pre-reflect supply expansion and future margin erosion. The analyst stated that cases of Alphabet and Meta from 2020 to 2022, Amazon from 2017 to 2018, and Nvidia from 2023 to 2024 substantiate this pattern, with the current memory industry positioned in the same valuation trap zone.
FAQ
What valuation levels did Samsung Electronics and SK Hynix Korean stocks reach?
Samsung Electronics and SK Hynix 12-month forward price-to-earnings ratios fell to 4.8x and 5.3x respectively, which LS Securities identified as historical low ranges.
Why did LS Securities analyst advise caution despite low valuations?
Analyst Hwang San-hae stated that the discount structure characteristic of AI cycle leaders and valuation errors during rapid earnings re-evaluation periods make low PER metrics insufficient grounds for increasing portfolio weightings, despite apparent valuation appeal.
What profit level did Korean memory semiconductor companies reach relative to hyperscaler spending?
Samsung Electronics and SK Hynix operating profit surged to 57% of hyperscaler capital expenditure levels, which the analyst noted exceeds past Nvidia bottleneck levels.
