As the rally in global semiconductor stocks falters, concerns are rising about volatility in Korea's chip-heavy stock market. On the 28th local time, the Philadelphia Semiconductor Index (SOX) fell 3.58% from the prior session.
After ending an 18-session winning streak, it posted a second straight day of losses on the 27th. SOX had surged 38.6% at this month's peak, the second-highest on record 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 doubt over whether AI investments actually make money. The Wall Street Journal (WSJ) recently reported that OpenAI failed to meet targets for new users and revenue and that internal concerns are growing over whether it can shoulder massive data center construction costs. As cracks appear in the sustainability of the AI investment cycle, buying appetite in the market has rapidly cooled.
This trend is fatal for Korea's stock market, which is overwhelmingly dependent on semiconductors. The entire KOSPI is swayed by swings in major chip stocks such as Samsung Electronics and SK hynix.
Warning signs of overheating are also emerging in Korea's semiconductor sector. SK hynix shares have recently broken above 1.3 million won and continued to soar, while Samsung Electronics has been stuck in a 220,000-won box range, showing a relatively heavy tone.
On the 27th, BNK Investment & Securities unusually downgraded its investment rating on SK hynix to "hold" from "buy." It was the first downgrade report on SK hynix from the securities community in nine months since July last year.
Lee Min-hee, an analyst at BNK Investment & Securities, said, "The inference artificial intelligence (AI) cycle is entering the latter phase, while the sales mix of the relatively less profitable HBM4 (sixth-generation HBM) is expanding," adding, "Earnings are expected to slow in the second half." Lee added, "Hyperscalers' AI facility investment growth has also somewhat slowed since March, and the narrowing gap between spot and fixed transaction prices could weaken the uptrend in average selling prices (ASP)."
Seasonal factors are also a burden. Typically, semiconductor stocks tend to see weakened supply-demand momentum after earnings releases, and some analysts say this trend could reappear starting in May.
Lee Kyung-soo, an analyst at Hana Securities, said, "The recent pace of semiconductor earnings upgrades temporarily slowed after earnings announcements, and supply-demand energy is weakening, as seen in declining assets of semiconductor exchange-traded funds (ETFs)," explaining, "The semiconductor index has tended to underperform the market during the earnings-void months of February, May, August, and November, and there is a high chance it will return to the existing seasonal weakness starting in May."
There are short-term variables as well. 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 over 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 investments, while Meta and MS weakened as worries mounted that their AI-related investment scale is excessive.
Their investment directions are expected to have a direct impact across Korea's semiconductor sector. Because the results of Samsung Electronics and SK hynix are linked to the scale of big techs' AI facility investments, analysts say sensitivity to changes in their capital expenditure will only increase.
Jeong Hee-chan, an analyst at Samsung Futures, said, "Given that big tech corporations have significantly expanded AI investments, the key in this earnings season is whether they are generating enough revenue to cover those expenses," adding, "It is necessary to prepare for the possibility of increased stock market volatility as major events continue."