Semiconductor stocks plunged on concerns about Meta-driven artificial intelligence (AI) infrastructure investment, but an outlook emerged that the market's focus will soon shift to the coming earnings season. Analysts said the process will move from short-term news to reconfirming AI investment and the memory cycle through corporate earnings.
Lee Sang-jun, a researcher at NH Investment & Securities, said in a report on the 3rd, "The volatility amplified by memory-related noise will gradually ease as the earnings season reconfirms fundamentals," adding, "Even in a high-volatility phase, attention should turn to earnings."
The domestic stock market plunged the previous day as interpretations spread over Meta's AI infrastructure business strategy. KOSPI and KOSDAQ fell 7.89% and 6.74%, respectively, and a sell-sidecar was triggered in both markets. Foreigners and institutions were net sellers of more than 4 trillion won and 2 trillion won, respectively, on KOSPI.
The market took foreign reports that Meta is reviewing a plan to sell excess AI computing resources externally as a signal of slowing AI demand and reduced capital expenditures (CAPEX). In the United States, Micron plunged more than 10%, and in Korea, profit-taking poured in, centered on Samsung Electronics and SK hynix.
However, NH Investment & Securities viewed this issue as a strategy to monetize AI infrastructure rather than reduce AI investment. Meta has already said that external corporations are continuing to request purchases of AI services and computing resources, and it explained that the likely items for sale are idle inventories of previous-generation equipment rather than the latest graphics processing units (GPUs).
The researcher said, "It is reasonable to see this as a strategy to use idle resources because AI computing demand existed first," adding, "It is excessive to interpret this as a reduction in AI investment through consolidation."
The semiconductor concentration of the domestic market was also cited as a reason for heightened volatility. Samsung Electronics and SK hynix account for more than half of KOSPI's market capitalization, and including related stocks, the weight exceeds 60%, leading to a larger swing in the domestic market even on the same bad news, analysts said. In addition, the expansion of single-stock leveraged ETFs was pointed to as a factor that heightened volatility.
NH Investment & Securities predicted that market attention will naturally shift to earnings going forward. Starting with Samsung Electronics' preliminary earnings announcement on the 7th, ASML will report on the 15th and TSMC on the 16th. In the third and fourth weeks of July, U.S. big tech corporations driving the expansion of AI investment, including Meta, Alphabet, Microsoft, and Amazon, are also scheduled to report earnings.
The researcher said, "Meta Chief Executive Officer (CEO) Mark Zuckerberg has also noted that 'underinvestment is more dangerous than overinvestment,'" adding, "With AI token shortages expected to continue at least through 2028, the trend of big tech corporations expanding AI investment is likely to persist."