Shares of Samsung Electronics (005930) and SK hynix (000660), which have led South Korea's stock market, have been stuck in a trading range for nearly two months, drawing attention to whether the third-quarter earnings season will become a turning point for a rebound in chip stocks. Analysts say strong memory prices and expanding artificial intelligence investment could give the shares fresh upward momentum from October on the back of an earnings rally. External variables such as high interest rates, the exchange rate and geopolitical tensions remain wild cards.
Samsung Electronics closed at 253,000 won on the 16th, up 4,500 won or 1.81% from the previous session, according to the Korea Exchange (KRX), while SK hynix ended at 1.755 million won, up 65,000 won or 3.85%. Samsung Electronics has been fluctuating in the mid- to high-200,000-won range through August and September. SK hynix has also been moving in the mid- to high-1-million-won range, remaining within its trading band.
Even large-scale share buybacks have struggled to lift the stocks. Samsung Electronics decided to buy back a total of 53,285,968 shares for about 15 trillion won ($10.8 billion) between the 24th of last month and Nov. 21. SK hynix plans to spend about 40 trillion won ($28.8 billion) to purchase 24.07 million shares between the 20th of last month and Nov. 19 and cancel all of them.
Additional shareholder returns are seen as a variable that could move the shares. Samsung Electronics is expected to have a total of 90 trillion to 110 trillion won available for shareholder returns this year. What has been confirmed so far is a third-quarter cash dividend of about 30 trillion won, with the split between dividends and share buybacks and cancellations to be decided at a board meeting in January. SK hynix, which has announced a share buyback plan of about 40 trillion won, is expected to unveil follow-up shareholder return measures including a special dividend during the third quarter. "Share buybacks are a supply-and-demand factor that supports the downside of the share price, but a sustained rally requires confirmation of earnings and growth potential," said Lee Jong-hyung, head of the research center at Kiwoom Securities (039490). "What matters going forward is whether commodity memory prices and high-value products centered on HBM4, a high-bandwidth memory chip, will grow."
Analysts are focusing on the third-quarter earnings season, which begins in earnest next month, as the point of a rebound. In particular, it is important whether U.S. big tech companies confirm their AI capital spending stance in October earnings reports. "I think the third-quarter earnings season could serve as a trigger for the shares to gradually reflect fundamentals and gain upward momentum," said Park Yeon-joo, head of the research center at Mirae Asset Securities (006800). "It is important to see confirmation in October big tech earnings that AI investment is continuing."
Global investment banks are also offering positive outlooks on memory supply and demand. Citi projected that a memory supply shortage could last until 2031 as demand for HBM, server DDR5 and enterprise solid-state drives (eSSD) rises simultaneously due to AI's continuous learning. Citi also named Samsung Electronics and SK hynix as key beneficiaries of the structural increase in memory demand.
Target prices set by brokerages also far exceed current share prices. Among major securities firms, Korea Investment & Securities set target prices of 650,000 won for Samsung Electronics and 4.7 million won for SK hynix, while Nomura offered 670,000 won and 4.7 million won respectively, indicating expectations of significant further upside.
Some analysts are cautious, saying strong third-quarter results alone will not immediately put the shares on an upward trend. The key reason Samsung Electronics and SK hynix shares have been stuck in a range is skepticism about the sustainability of AI investment and the economic outlook. The recent decline in the won-dollar exchange rate is also weighing on earnings at Samsung Electronics and SK hynix, which rely heavily on exports. A stronger won reduces reported earnings when revenue and profit earned in dollars are converted into won. "For chip stocks to shift to an upward trend, confidence in AI investment and the semiconductor cycle must be restored," said Chung Yong-taek, senior research fellow at IBK Investment & Securities. "What matters is whether signals emerge that interest rates are falling and aggressive AI investment is continuing."
