Samsung, SK Hynix stocks poised to break previous highs on AI demand, analyst says

The memory semiconductor market is experiencing an unprecedented boom, driven by artificial intelligence, with analyst Hwang Min-sung predicting that major South Korean companies like Samsung Electronics and SK Hynix will see their stock prices exceed previous peaks. Hwang, a veteran in the semiconductor industry with over 30 years of experience, likens the current demand to a "gold rush" for DRAM, stating that "memory is still a cyclical industry." He asserts that memory companies will continue to generate profits unseen before.

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DRAM is more expensive than gold in terms of grams.

Hwang dismisses concerns that rising U.S. interest rates will halt AI capital expenditure. He argues that the global economy, including South Korea's, is structurally sound and can withstand moderate rate increases. He points to the recent surge in South Korean exports and the resilience of U.S. stock markets as evidence. "If the economy lacked the strength to execute AI CAPEX even with a 0.25%p rate hike, stock prices should have plummeted when Fed Chair Kevin Wash, whom President Donald Trump had expected to lower rates, hinted at a rate increase," Hwang stated, noting that U.S. stocks have recently hit new highs.

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Memory companies will continue to generate profits unseen before.

Despite the optimistic outlook, Hwang cautions that the memory industry's cyclical nature has not disappeared. He predicts that the operating profits for Samsung Electronics and SK Hynix will peak around 2028, coinciding with the start of new fab production. While long-term supply agreements (LTAs) may prevent a drastic profit drop, he doesn't rule out a significant downturn. "As much money and energy have been concentrated in the current upcycle, a downturn could bring severe pain, like a financial crisis," he warned.

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The current upswing led by AI is a scale of upward cycle not seen since the boom triggered by PCs in the 1990s.

Furthermore, Hwang expressed concern about China's rapidly advancing memory technology. He believes it's a mistake to assume Chinese memory chips are unsuitable for AI servers, noting that some U.S. PC manufacturers and even server operators are already using them. "Korean companies could face significant difficulties due to the influence of Chinese companies in the future," he concluded, drawing a parallel to how practical and cost-effective Hyundai cars outsell premium brands like BMW.

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If the economy lacked the strength to execute AI CAPEX even with a 0.25%p rate hike, stock prices should have plummeted when Fed Chair Kevin Wash, whom President Donald Trump had expected to lower rates, hinted at a rate increase.