As the rally in global semiconductor stocks falters, concerns are rising about volatility in Korea's semiconductor-heavy market. On the 28th local time, the Philadelphia Semiconductor Index (SOX) fell 3.58% from the previous session.
After ending an 18-session winning streak, it posted a second straight day of losses following the 27th. SOX had surged 38.6% at this month's peak, the second-highest since February 2000 (50.4%) just before the dot-com bubble burst.
At the root of the pullback after the sharp rise is a fundamental question of whether AI investments actually make money. The Wall Street Journal (WSJ) recently reported that OpenAI has failed to meet targets for new users and revenue, and that internal concerns are growing over whether it can shoulder the massive data center build-out expense. As cracks form in the sustainability of the AI investment cycle, buying sentiment in the market has frozen rapidly.
This trend is lethal for Korea's market, which is overwhelmingly dependent on semiconductors. That is because the entire KOSPI swings with the ups and downs of large-cap semiconductor stocks such as Samsung Electronics and SK hynix.
Warning signs of overheating are also being detected in Korea's semiconductor sector. SK hynix shares recently broke through 1.3 million won, extending a high-altitude run, while Samsung Electronics has been stuck in a 220,000-won box range, showing a relatively heavy trend.
On the 27th, BNK Investment & Securities unusually downgraded its investment opinion on SK hynix to "hold" from "buy." It was the first downgrade report on SK hynix from the securities industry in nine months since July last year.
Lee Min-hee, an analyst at BNK Investment & Securities, said, "As the inference artificial intelligence (AI) cycle enters the latter stage, the sales share of HBM4 (6th-generation HBM), which is relatively less profitable, is expanding," adding, "Earnings are expected to slow in the second half." Lee added, "The increase in AI facility investment by hyperscalers has also somewhat slowed since March, and with the narrowing gap between spot and fixed transaction prices, the uptrend in average selling prices (ASP) could weaken."
Seasonal factors are also a burden. Typically, semiconductor stocks tend to see weaker fund flows after earnings releases, and some analysis says this pattern could reappear starting in May.
Lee Kyung-soo, an analyst at Hana Securities, said, "The pace of semiconductor earnings upgrades has temporarily slowed after earnings releases, and fund-flow energy is weakening, as seen in declining assets of semiconductor exchange-traded funds (ETFs)," explaining, "The semiconductor index has tended to underperform the market in the earnings-forecast vacuum months of February, May, August, and November, and from May it is highly likely to return to its usual seasonal weakness."
However, short-term variables remain. On the 29th local time, major big tech corporations including Alphabet, Microsoft (MS), Amazon, and Meta announced first-quarter results, but market reactions were mixed.
All of these corporations delivered "earnings surprises" that beat market expectations, but differing views on future capital expenditure plans sent their shares in different directions in after-hours trading. Alphabet rose as growth in its cloud institutional sector helped ease some concerns about the profitability of AI investment revenue, while Meta and MS weakened as worries mounted that their AI-related investment scale is excessive.
The direction of their investments is expected to have a direct impact across Korea's semiconductor sector. Because the earnings of Samsung Electronics and SK hynix are linked to the scale of big techs' AI facility investment, analysts say sensitivity to changes in their capital expenditure will only grow.
Jeong Hee-chan, an analyst at Samsung Futures, said, "Given that big tech corporations have sharply expanded AI investments, the key in this earnings season is whether they are generating enough revenue to cover that expense," adding, "It is necessary to prepare for the possibility of greater stock market volatility as major events continue."