Global investment bank Morgan Stanley recommended reducing exposure to memory chip stocks. On the same day, shares of Samsung Electronics (005930.KS), which had announced record earnings, fell nearly 7%, drawing investor attention to the report.
Record Earnings, But Plunging Stock
On Monday, Samsung Electronics disclosed before the market opened that it recorded preliminary revenue of 171 trillion won and operating profit of 89.4 trillion won in the second quarter of this year. Revenue rose 129.3% from a year earlier, while operating profit surged 1,810.3%, with both figures setting record highs for the third consecutive quarter.
Adding an estimated 17 trillion won in incentive provisions, operating profit effectively exceeds 100 trillion won, far surpassing the combined operating profit for the three years from 2023 to 2025 (82.9 trillion won).
However, Samsung Electronics shares closed at 296,000 won that day, down 6.92% from the previous day. The drop is interpreted as a "sell-on" trend that overlapped with earnings that beat market expectations, as investors sold shares following the strong earnings announcement.
Foreign ownership also fell to its lowest level in 17 years, since the financial crisis. Analysts interpret this as the result of a flood of large-scale profit-taking amid a slowdown in memory chip price increases and growing concerns that earnings have peaked.
Morgan Stanley Recommends Reducing Exposure
In a report Sunday, Morgan Stanley said chip earnings momentum has passed its peak and further correction is likely, recommending that investors reduce exposure to memory chip stocks such as Samsung Electronics, SK hynix, and Micron, and increase exposure to Big Tech hyperscalers.
"We believe that the narrow, semiconductor-centered rally is ending, and the market is gradually entering a phase where leadership is broadening," the report said. "Accordingly, in the short term, we prefer to reduce chip exposure and favor hyperscalers." In effect, it viewed the slowdown in the upward revisions of earnings estimates that had lifted chip stocks as a signal of a stock price peak.
Morgan Stanley also noted that the recent sharp decline is likely an early sign that market leadership is shifting to other sectors. However, it said the AI value chain rally itself is not over, forecasting that only memory chips, which have a strong commodity character, could face further correction. It added that hyperscalers such as Alphabet and Amazon would take over the market leadership role going forward.
"We view Meta's announcement to sell its surplus AI computing capacity externally as an example showing that this shift is beginning," the report said. The sectors identified as likely to see capital flows include consumer goods, transportation, regional banks, and biotech.
The Track Record of the 'Chip Grim Reaper'
Morgan Stanley's latest pessimism has drawn market attention, recalling the "chip winter" reports that shook the domestic stock market in the past.
The report that earned Morgan Stanley the nickname "chip grim reaper" was "Memory, Winter is Coming," released in August 2021. At the time, when the chip boom was at its peak, it foresaw slowing PC demand and oversupply, abruptly downgrading its investment ratings on Samsung Electronics and SK hynix. When a chip downcycle soon arrived and the prediction proved correct, the report's market impact grew even greater.
A similar shock was repeated three years later, in September 2024. During the Chuseok holiday, Morgan Stanley released a report titled "Winter Always Laughs Last," raising concerns about HBM oversupply for SK hynix, which had been hitting record highs, and cutting its target price by 54% from 260,000 won to 120,000 won. Immediately after the holiday, more than 15 trillion won in the combined market capitalization of the two companies vanished in a single day on the domestic market.
However, unlike in 2021, AI memory demand did not weaken during the 2024 winter theory period, and within a year Morgan Stanley itself reversed its target prices, saying its "forecast was wrong."
The 'Chip Grim Reaper' Steps In... "Sell Samsung and Hynix"
