Samsung Electronics announced second-quarter results that beat market expectations, but foreign selling has scarcely eased. The semiconductor cycle itself remains solid, but analysts said the market is already focusing more on the possibility that the peak in the "earnings growth rate" has passed than on "earnings" themselves. For now, whether investor sentiment toward artificial intelligence (AI) recovers and whether foreign fund flows improve are expected to be the key variables for Korea's stock market.
Byun Jun-ho, a researcher at IBK Securities, said in a report on the 8th, "Overall, the second-quarter results of the three large companies started off not particularly bad," noting, "In particular, semiconductors saw positive forward guidance in Micron's earnings release, and expectations are high for third-quarter results at Samsung Electronics and SK hynix."
In fact, Samsung Electronics posted second-quarter revenue of 171 trillion won and operating profit of 8.94 trillion won, beating market forecasts. Semiconductor exports in June also stayed strong, and the prevailing view is that there are no major issues with the industry's fundamentals.
The problem is supply and demand. Even though Samsung Electronics announced record-breaking results, its share price fell sharply, and foreigners were the main sellers in the market.
Byun said, "Foreign selling has continued since the start of the year and intensified in the second quarter," adding, "Since June 19, they have posted net selling every single day without exception."
He said, "Selling has persisted regardless of catalysts, whether positive or negative, creating a significant supply-and-demand burden," analyzing that "behind foreigners' selling despite strong semiconductor results appears to be concern about a peak-out in investor sentiment rather than fundamentals."
Meta's plan to sell its AI infrastructure externally, which recently surfaced, was also cited as a factor shaking investor sentiment.
Byun said, "The AI market and the investment environment themselves are still presumed to be favorable, but because semiconductor stocks have risen sharply, they may now respond more sensitively to negatives than positives," adding, "If the flow of AI-related news improves, the recent share price decline could be just temporary noise."
He pointed to the U.S. big tech earnings releases scheduled for the end of this month as the inflection point to judge whether investor sentiment will recover.
Byun said, "If strong AI investment intent and positive comments from big tech are confirmed at the end of July, share price trends and foreign fund flows could improve again."
The securities industry also focused on the possibility that foreigners are pricing in a slowdown in next year's earnings growth rate rather than the level of earnings themselves.
Byun said, "Looking at the current market consensus, Samsung Electronics' operating profit growth rate is expected to peak in the second quarter of 2026, and SK hynix in the second to third quarter of 2026," adding, "On an annual basis as well, this year's growth rate is highly likely to be a short-term peak."
He added, "In the past, semiconductor stock prices and foreign fund flows tended to be linked more to the earnings growth rate than to earnings themselves," noting, "In periods when the operating profit growth rate peaked, such as 2017, 2021 and 2024, foreign selling commonly dominated in the second half."
However, he assessed that this cycle also differs from the past in some respects.
Byun said, "Currently, a new industry cycle centered on HBM and long-term agreements (LTA) is unfolding, so it is difficult to compare it the same way as before," adding, "If the share of LTAs keeps expanding, semiconductor earnings stability will improve and concerns about cyclicality could also ease."
IBK Securities left open the possibility that foreign selling pressure could ease in the short term.
Byun said, "As the KOSPI fell sharply in the short term, valuations have become attractive, so foreign selling pressure could somewhat ease from the latter part of this week," adding, "However, for the market to show a meaningful uptrend again, improved investor sentiment toward AI and the semiconductor cycle or active inflows of domestic funds are needed."