The market swings; analysts do not
On Wednesday, the Kospi index closed at 5,735.66 points, up 3.29% from the previous session, according to The Korea Herald. The rebound was driven by the country's two main semiconductor manufacturers: Samsung Electronics and SK hynix gained more than 7% in the morning, a move that, the newspaper writes, triggered a five-minute buy-side sidecar. The recovery follows the 7.57% plunge recorded last Thursday, which had caused a twenty-minute trading halt across the entire market.
The volatility reflects a revision in investors' expectations for AI-related demand, but the main investment houses do not appear to share the alarm. Nomura, in a Monday report, confirmed its positive view of the memory sector, forecasting supply bottlenecks at least through 2028 and naming Samsung and SK hynix as preferred stocks.
Target prices far from market prices
The Japanese bank reiterated its 'buy' rating with target prices of 670,000 won for Samsung (about $505) and 4.7 million won for SK hynix. These are values equal to about three times and 3.6 times Wednesday's closing prices, respectively 223,500 won and 1.294 million won. Such a wide gap between valuation and market, according to the bank, signals an underestimation of both the breadth of AI demand and the earnings it can generate along the supply chain.
Nomura also dismissed concerns raised by reports that ChangXin Memory Technologies, China's largest DRAM manufacturer, intends to launch a next-generation server memory by the end of the year. The market reaction was described as 'excessive.' The investment thesis, according to the report, is based on the continued expansion of data centers and the resulting memory requirements.
Korean banks point to a different cycle
JPMorgan, at the beginning of the month, maintained its 'overweight' rating on Korean and Taiwanese equities, expecting AI-related stocks to continue driving gains in Asian markets next year as well. The U.S. bank forecasts tight supply conditions through 2028, sufficient to guarantee Asian companies significant pricing power along with volume growth, with net profits for the ecosystem exceeding $1 trillion.
Korean brokerage firms also share this view. Han Dong-hee, an analyst at SK Securities, argues that memory demand in the AI era differs from that of the past: previously it was driven by mature sectors such as PCs and mobile devices, making it cyclical, whereas the emergence of AI as a new source of demand has reduced the sector's sensitivity to economic cycles. Mirae Asset Securities maintained its 'overweight' rating on the semiconductor sector on Monday, with target prices unchanged at 400,000 won for Samsung and 3.1 million won for SK hynix. Analyst Kim Young-gun described AI demand as extremely resilient, with no signs of slowing.
What remains to be verified
The picture that emerges is one of divergence between the daily performance of the index and analysts' long-term valuations. However, forecasts of supply bottlenecks through 2028 and lasting pricing power are hypotheses formulated by the banks, not established facts. It also remains to be measured how effectively ChangXin Memory Technologies can enter the server segment: Nomura plays down its scale, but this is an assessment that will depend on the actual launch and technical specifications. Finally, the sector's resilience to economic cycles is a thesis supported by analysts and not yet confirmed by data. The material provides no indications on the two companies' financial results or on the timing of any corrections.
