With SK hynix surpassing the market capitalization of Samsung Electronics common shares for the first time, analysts in the securities industry said this should be read not as a simple change in market cap rankings but as a shift in the market's valuation criteria.
No Dong-gil, a researcher at Shinhan Investment & Securities, said in a report on the 23rd that "SK hynix's ascent to No. 1 in market cap can be defined not as a change in the top corporations but as an event that altered the benchmark for the top-tier premium."
On the close on the 22nd, SK hynix's market capitalization was 2,080 trillion won, surpassing the market capitalization of Samsung Electronics common shares (2,066 trillion won). However, Samsung Electronics' total market capitalization, including preferred shares, stands at 2,246 trillion won, still above SK hynix.
No assessed that the essence of this market cap reversal lies not in a change in corporations' scale but in a reappraisal of capital efficiency in the age of artificial intelligence (AI) semiconductors.
He explained, "Rather than SK hynix overtaking Samsung Electronics in profit size, it should be seen as the market starting to assign a higher value to the durability of capital efficiency formed through high-bandwidth memory (HBM)."
He added, "The previous premium was assigned to Samsung Electronics' integrated platform spanning memory, foundry, mobile, home appliances, and system semiconductors," and "in contrast, SK hynix's premium attaches to the narrow but high-margin AI memory bottleneck."
Some in the market have raised overheating or bubble concerns over SK hynix's market cap reversal. In past memory cycles, high profitability did not last long and ultimately led to expanded supply and falling prices.
No explained, "The core of the bubble view starts not from the mere fact that market caps have reversed, but from the contention that the market may be excessively making HBM's differentiation permanent."
In fact, SK hynix's valuation is far above its historical average. SK hynix's 12-month forward price-to-book ratio (PBR) is 4.15 times, a level exceeding 3 sigma (σ) above its own ROE-PBR regression line since 2023. Samsung Electronics' forward PBR is 2.64 times.
However, Shinhan Investment & Securities assessed that it is difficult to conclude the current situation is simply a bubble. Unlike in the past, the HBM market has high entry barriers and supply constraints, which could slow the speed of mean reversion in profitability.
No emphasized, "The key question for current semiconductor valuations is not the propriety of a 10 times PER itself," adding, "What matters is whether the recently surged profits will quickly roll over as in past memory cycles, or whether, thanks to the HBM effect, high profitability can be maintained for the next two to three years."
He added, "If it is the latter, SK hynix overtaking Samsung Electronics common shares in market capitalization is interpreted not as a definitive peak signal but as an event showing that the market's method of evaluating the durability of capital efficiency is changing."
Shinhan Investment & Securities viewed this market cap reversal as potentially setting the benchmark for future shifts in market leaders. Whereas undervaluation used to matter, the key evaluation criterion going forward will be how long a high return on equity (ROE) can be maintained.
No said, "What SK hynix changed is the criteria for choosing candidates," adding, "More important than a low PBR is the reason a high ROE will be sustained." He advised, "Among discounted sectors, we must select those where profit growth is expected to continue over the next two to three years, PBR rebounds, and grounds emerge for sustained ROE."