KOSPI falls for second day on chip cycle peak fears despite Samsung's record earnings

South Korea's benchmark KOSPI index experienced a significant decline for the second consecutive day, closing at 7,246.79 on Wednesday. This drop of 5.25% from the previous day marked the first time the index had fallen below the 7,500-point threshold since June 8. The market's volatility is underscored by the KOSPI's swing of over 2,000 points between its intraday high and low within the past month.

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During the second half of 2026, when Samsung Electronics will experience slower EPS [earnings per share] growth, the volatility of the stock market will be further impacted by changes in the memory industry.

The downturn occurred even as Samsung Electronics announced record operating profits of nearly 90 trillion won for the second quarter. Investors are increasingly worried that the semiconductor industry's upcycle may be reaching its peak. Both Samsung Electronics and SK Hynix saw their stock prices decrease, falling by 6.25% and 5.68% respectively on Wednesday.

Fears of a semiconductor market peak are dominating investor sentiment. Doubts persist about the ability of memory chipmakers to sustain their current extraordinary earnings levels. Kiwoom Securities notably lowered its target price for Samsung Electronics from 430,000 won to 390,000 won, citing signs that rising component costs and potentially softening demand, exemplified by recent price hikes on flagship smartphone models, are beginning to erode profitability. The firm also anticipates intensified competition from Chinese memory semiconductor companies.

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The market is now focusing on the long-term sustainability of earnings, rather than on short-term earnings surprises.

Analysts like Pak Yu-ak from Kiwoom Securities predict that the second half of 2026 will see slower earnings per share growth for Samsung Electronics, further impacting stock market volatility due to shifts in the memory industry. While some securities firms have maintained their target prices, they acknowledge that Samsung's record earnings were insufficient to quell concerns about a potential peak. Son In-jun of Eugene Investment & Securities noted that the market is now prioritizing the long-term sustainability of earnings over short-term surprises. Despite these concerns, many firms do not yet view the current downturn as a definitive end to the semiconductor supercycle, as profit forecasts for the sector continue to rise. The market's attention is now shifting to hyperscalers and major technology companies, with upcoming earnings reports and AI investment plans expected to be crucial indicators.

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The earnings reports from Big Tech companies, scheduled for the end of July, and future plans for AI investments will be crucial.