Hyundai Motor Securities said volatility in the semiconductor sector could widen for the time being as U.S. big tech corporations face a growing burden from investments in artificial intelligence (AI). It said the market's doubts about the sustainability of investment are mounting as AI infrastructure investment expense is increasing faster than expected due to rising memory prices.
Researcher Kim Jae-seung at Hyundai Motor Securities said in a report on the 29th, "Recently, the share prices of U.S. big tech corporations have been weak, weighing on semiconductor stocks," adding, "The key to the current AI-related share price trend is not concerns about AI demand, but the fact that the investment expense to meet AI demand is rising rapidly."
According to the report, higher memory semiconductor prices are positive for chipmakers' earnings, but the capital expenditure (CAPEX) burden of hyperscalers that buy them is rising quickly. While the AI investment race is still ongoing, the market has begun to worry about how long such large-scale spending can continue.
In fact, U.S. big tech corporations are also changing how they manage cash. In the past, they conducted large share buybacks on the back of strong operating cash flow, but since expanding AI infrastructure investment they have reduced buybacks and increased corporate bond issuance. Analysts say the expansion of AI investment is turning platform corporations into a capital-intensive industry.
Kim said, "In the past, big tech corporations were evaluated as platform corporations with strong cash generation, but as AI investment increases, they are shifting into a capital-intensive corporate form," adding, "The shift from platform corporations to capital-intensive corporations inevitably lowers valuations compared with the previous platform model because of uncertainty around large CAPEX."
The securities industry expects this investment burden will be difficult to resolve in the short term. Hyundai Motor Securities projected that in 2026 the ratio of CAPEX to operating cash flow at U.S. big tech corporations will remain above 90%. As a result, it said doubts about the persistence of AI investment and volatility in semiconductor stocks could continue for a considerable period.
Kim said, "Concerns about the persistence of big tech's CAPEX will not be easy to resolve quickly," adding, "In 2026, periods when the CAPEX-to-operating-cash-flow ratio exceeds 90% are expected to continue. Given the tight cash flow, market volatility over the persistence of AI investment is expected to continue into 2026."
However, Hyundai Motor Securities said this volatility should not be read as a slowdown in AI industry growth. As the AI investment race continues, a heavier investment burden is an inevitable process, and the industry's long-term growth potential remains intact.
Kim added, "Excessive CAPEX means AI competition is that fierce," adding, "Until CAPEX actually decreases, any pullback in Korea's semiconductor sector should be used as a buying opportunity. Despite the sharp rise in share prices, Korea's semiconductor sector is still cheap."