Korean chip stocks rebound on tight supply

Shares of South Korean ‌chipmakers Samsung Electronics and SK hynix reversed early gains to fall sharply on Wednesday, amid lingering concerns over slowing memory price growth and whether earnings have peaked.

Samsung slid as much as 7.6% and SK hynix dropped as much ​as 5.2% in afternoon trading, after earlier rebounding as much as 1.4% and 5.8%, ​respectively. Both stocks had opened the day with losses, tracking an overnight decline in ⁠US chip stocks.

The reversal suggested bargain hunting seen earlier in the session faded as investors remained ​cautious following Samsung’s sharp post-earnings decline a day earlier.

Positive sentiment around SK hynix’s planned US listing failed to ​provide any lift.

Analysts said the earnings season is only just beginning and expectations for strong results from chipmakers remain intact. However, they added that while memory chip supply is expected to remain tight through the third quarter, investors are ​increasingly focused on signs that the pace of memory price increases could slow in the second ​half of this year, clouding the outlook for further earnings growth.

Park Yuak, an analyst at Kiwoom Securities, cut his ‌target ⁠price for Samsung by about 9% to 390,000 won ($257.15), saying rising prices for components such as CPUs and package substrates were pushing up PC and smartphone prices, making customers more cautious about additional memory purchases.

Samsung shares last traded at 281,000 won.

JPMorgan said in a note that memory prices would remain ​the key driver of ​earnings in the second ⁠half, as supply continued to lag demand despite growing customer resistance to higher costs. The bank added that NAND conventional chip pricing could outperform investor ​expectations, supported by strong demand from US hyperscalers.

The Korean session began after ​a broad overnight ⁠selloff in US semiconductor shares, with Intel, Micron and AMD falling 9.7%, 4.7% and 6.5%, respectively. The Philadelphia semiconductor index lost 4.7%.

The selling was triggered by Samsung’s second-quarter preliminary earnings on Tuesday, after the chipmaker’s estimate ⁠of ​a 19-fold jump in quarterly operating profit failed to satisfy ​investors’ lofty expectations despite robust demand for AI memory chips.

Samsung’s shares tumbled 6.9% on the day, fuelling a broader retreat from ​AI-related investments that later spread to Wall Street. Reuters