AB CIO Sees AI Spending Staying Strong for Another One to Two Years

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. AI Investment to Run One to Two More Years, Benefiting Memory and Power

- Key points: In an interview with The Seoul Economic Daily on the 5th, Ray Chiu, CIO for thematic equities at AB, said the expansion in AI investment will continue for the next one to two years, with the beneficiaries widening to memory, power infrastructure and data center efficiency. AB is a global asset manager that oversaw about 1,404 trillion won in assets as of the end of June this year. Chiu said the current AI boom differs from the dot-com bubble in that the investment is being led by companies with both profitability and scale, while cautioning against the possibility of overinvestment at some firms. Chiu also said Korean chipmakers hold a strategically important position in high-bandwidth memory (HBM) and DRAM, and that the firm favors companies that can ease bottlenecks in grid capacity and power density.

2. [Investment Window] Won-Dollar Rate Has Paused. Will It Rise Again?

- Key points: With the won-dollar rate moving sideways in the mid-1,300s, one assessment holds that it is likely to climb again. Expectations of a dollar supply that began with SK hynix's issuance of American depositary receipts (ADRs) in the United States, policy coordination among Korea, the U.S. and Japan, and the Bank of Korea's hawkish stance all drove the won higher. Those factors, however, were largely priced in during the plunge, while dollar-strengthening factors have been priced in less — U.S. market interest rates have moved above the 5.1% line and the dollar index has broken through 101. Meanwhile, corporate dollar deposits have increased despite a record current account surplus, and the reading is that dollar demand could grow further once 200 billion dollars of investment in the U.S. gets under way in earnest.

3. Chip ETFs Facing Rebalancing Draw Flows Into Materials, Parts and Equipment

- Key points: Ahead of the scheduled rebalancing of seven semiconductor ETFs, attention is turning to shifts in supply and demand for materials, parts and equipment stocks. Samsung Electronics' weighting in TIGER Semiconductor TOP10 stood at 26.98% as of the 2nd, 1.98 percentage points above the 25% per-stock cap, which on a simple calculation based on net assets means about 209.8 billion won must be pared back. Samsung Securities (016360.KS) estimated buying demand of about 90 billion won for SK hynix and about 80 billion won for SK Square (402340.KS). Measured against average daily trading value over the past 20 sessions, the impact is more pronounced among mid-cap names, at 27.5% for ISU Petasys (007660.KS) and 14.8% for Wonik IPS (240810.KS). Jun Kyun, an analyst at Samsung Securities, said the rebalancing overlaps with an options expiration day and that investors need to watch for wider price swings.

4. [Exclusive] Westinghouse Demands Higher Royalties for Korean Reactors in U.S.

- Key points: Westinghouse is reportedly demanding higher technology licensing fees than the amount pledged in a confidential settlement agreement (SA) reached last year, covering two Korean-designed APR1400 reactors to be built in the United States. The licensing fee under the SA is 175 million dollars per unit (about 236 billion won), and services worth 650 million dollars as well as rights to supply 50% of the nuclear fuel are also back on the negotiating table, raising concern that Team Korea's share could shrink further. Warning lights are flashing across the broader negotiations on investment in the U.S.: President Donald Trump unilaterally announced that the investment in an Alaska liquefied natural gas (LNG) project would exceed 50 billion dollars, and now Westinghouse is seeking an exception to an existing agreement. Canada's Cameco, which holds a 49% stake in Westinghouse, said Westinghouse would secure a compensation package worth about 2 billion dollars per APR1400 unit but that the terms are not binding.

5. AMRO Raises Korea's Growth Forecast Again, to 3.3% for This Year

- Key points: The ASEAN+3 Macroeconomic Research Office (AMRO) raised its forecast for Korea's economic growth this year by 0.2 percentage points to 3.3%. That follows an increase from 1.9% in April to 3.1% in July, amounting to an upward revision of 1.4 percentage points in half a year. AMRO projected growth of 2.7% next year. It lifted its inflation forecast for this year by 0.1 percentage point to 2.7% and lowered next year's to 2.3%. AMRO also expects the economies of Korea, China and Japan plus the 10 ASEAN members to grow 4.1% both this year and next, while flagging the possibility of a correction in equity markets driven by strength in technology shares, along with rising bond yields in major economies, as downside risks.

6. Margin Requirements on Samsung and SK hynix Derivatives Cut for First Time This Year

- Key points: In its October scheduled adjustment of the derivatives market, the Korea Exchange lowered the customer margin requirement on Samsung Electronics futures by 7.35 percentage points, to 42.60% from 49.95%. The rate for SK hynix was also cut by 0.90 percentage point, to 49.05% from 49.95%, while margin requirements on KOSPI 200 and KOSDAQ 150 futures were left unchanged at 21.75%. The two stocks' margin rates, at 22.20% and 29.85% respectively in January, surged through the year and came close to the 50% ceiling in September, making this year's first reduction significant. Some in the market expect the change to revive incentives for institutional program arbitrage, which could in turn boost trading in the spot market.