The KOSPI index, which has been on an unrelenting rally this year on the back of semiconductor earnings, hit the brakes. Concerns about a slowdown in artificial intelligence (AI) investment are surfacing across the market, quickly chilling sentiment toward semiconductor stocks that had enjoyed a seller's market.
Still, stock market experts interpret the recent pullback as a breather driven by short-term flows rather than a deterioration in fundamentals. They said there are no signs yet that the AI investment cycle has turned, and as long as U.S. hyperscalers keep expanding capital expenditures (CAPEX), the semiconductor-led uptrend is likely to continue for the time being.
A ChosunBiz survey of research chiefs at eight major domestic securities firms (KB, Shinyoung, Mirae Asset, Daishin, Samsung, Kiwoom, Meritz, Hana) on the outlook for the stock market in the second half found that despite the current short-term correction, most chiefs still see the long-term growth story for semiconductor stocks as intact.
◇ Concerns about an AI investment slowdown are "noise"… not a sign of damage to fundamentals
The chiefs agreed it is too early to interpret the recently raised concerns about weakening AI demand as a structural shift in the semiconductor industry. With news last week that OpenAI delayed its initial public offering (IPO), Apple is considering raising product prices, and Meta is entering a business to lease idle AI computing resources, worries have spread that the AI investment cycle may have peaked.
Kim Hak-kyun, head of research at Shinyoung Securities, said, "Meta's plan to use idle AI computing means a change in how existing data centers are used, not that they will stop buying semiconductors for AI," adding, "It does not signify a fundamental shift in the semiconductor industry."
Yang Ji-hwan, head of research at Daishin Securities, also said, "Concerns about the AI CAPEX rally are a recurring exam question we've seen over the past three years," and forecast, "As performance maximization of currently released AI models is expected within the next 12 months, competitive increases in investment will continue to prevent sunk costs of prior spending."
Rather, the recent correction in semiconductor stocks was more influenced by short-term supply-demand factors than worsening fundamentals, analysts said. Hwang Seung-taek, head of research at Hana Securities, said, "The recent semiconductor pullback is less about damage to fundamentals and more the result of profit-taking after a sharp rally, reduced crowding, and flows related to leveraged products coinciding."
There was also a view that the increased weighting of semiconductors should not be seen as a structural risk to the market. Lee Jong-hyung, head of research at Kiwoom Securities, said, "Given that semiconductors account for over about 90% of this year's KOSPI operating profit growth, we should be cautious about interpreting the concentration in semiconductors as a market risk."
◇ The semiconductor boom is still at the beginning… CAPEX is the key
The chiefs assessed that the AI investment cycle is still in its early stage. Park Yeon-joo, head of research at Mirae Asset Securities, said, "Earnings at semiconductor companies keep getting revised upward, global AI investment driving this remains at an early stage, Korean semiconductor valuations are attractive versus global peers, and long-term supply contracts are improving earnings stability for the sector, allowing valuations to recover. Considering these, a positive trend centered on semiconductors will continue."
They said as long as hyperscalers keep raising CAPEX, there is further upside. Kim Hak-kyun, head of research at Shinyoung Securities, said, "The most important things are hyperscalers' earnings releases and capital spending plans," adding, "So far, the investment expansion stance has been maintained, and we have not yet confirmed structural changes significant enough to alter our view on semiconductors."
The prevailing view was that semiconductor stocks will retain their leadership in the second half on the back of earnings improvement. Yoon Seok-mo, head of research at Samsung Securities, said, "We judge the AI semiconductor rally is still under way," adding, "It will continue to play a leading role in the second half." Lee Jong-hyung, head of research at Kiwoom Securities, said, "If past memory cycles were supply-driven, now there is structural demand called AI," adding, "The earnings visibility of the leaders will not be easily impaired."
However, because semiconductors are a representative cyclical sector, they advised continually checking the data. Kim said, "Since semiconductors are a cyclical industry, you should not approach them with only long-term optimism," adding, "Rather than assuming the next five years will be unconditionally good, we should assess new data as it comes in on three- and six-month horizons."
◇ U.S. rate hikes are a variable… but an AI investment halt is unlikely
The U.S. rate-hike stance was cited as a variable. Kim Dong-Won, head of research at KB Securities, said, "If rate hikes persist for a long time, the biggest risk is that it could lead to reduced AI investment." Park also said, "The risk factors are inflation and interest rates." The analysis is that as rates rise, corporations' capital-raising costs increase, making it difficult to execute CAPEX on the massive scale seen now.
However, they saw it as unlikely that rate increases alone would significantly curb AI investment. Kim said, "AI investment is not something that can be easily stopped, so the supply shortage will persist through 2028." Park also projected, "Because AI investment is essential, the impact of macro variables will diminish further."