On Dec 11, South Korea’s main bourse, the Korea Exchange, issued an “investment alert” on SK Hynix shares. The exchange also barred investors from buying SK Hynix on margin, instead requiring them to pay for the shares fully in cash. News of a potential New York stock listing had sent SK Hynix shares climbing by as much as 6.8% on Dec 8.
The alert on Dec 11 came just days after the exchange had issued an “investment caution” on SK Hynix on Dec 9, urging investors to exercise caution on the company. A similar warning had been issued on Nov 3. Pre-warnings, like the ones issued on Nov 3 and Dec 9, are valid for a day and usually precede a high-level alert. South Korea’s main bourse can halt trading for a day if a stock’s price goes up by 40% over two sessions.
Closer to home, the Monetary Authority of Singapore says in its annual Financial Stability Review, published on Nov 5, that some equity markets are seeing “relatively stretched valuations,” particularly in sectors like technology and artificial intelligence. The central bank did not name any markets, but noted that a “retrenchment of optimism in AI’s ability to generate sufficient future returns” could result in “sharp corrections in the broader equity market.”
Investors continue to remain sanguine on the trajectory of the AI industry. According to a survey conducted by Survation on behalf of HSBC Global Investment Research (HSBC), 78% of investors believe AI capital expenditure will continue to increase, while the remaining 22% think that there will be no change or a decrease in spending.
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The survey, which ran from Nov 17 to Dec 5, took in the views of 170 global investors representing US$1.96 trillion ($2.5 trillion) in total assets under management (AUM). About US$725 billion, or 37% of the AUM, is attributed to venture capital and private equity investors.
“This strongly suggests the investors still believe that AI continues to be in this buildout phase and that investments in models, data, and infrastructure should continue well into 2026,” HSBC says in its report on the survey results, published Dec 15.
Memory giants hyper-cyclical
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Morningstar’s Jing Jie Yu made headlines when he became the only analyst to issue a “sell” call on SK Hynix and Samsung Electronics. The Singapore Management University alumnus started his career at River Valley Asset Management, where he covered the consumer as well as technology, media and telecommunications (TMT) sectors. Yu joined Morningstar in December 2024 and continues to cover the TMT sector, focusing on semiconductors and hardware.
Yu maintains a KRW323,000 ($282) fair value estimate on SK Hynix but assigned a one-star rating to the company in late October. Morningstar ranks companies against a five-tier scale. A one-star rating “indicates a high probability of undesirable risk-adjusted returns from the current market price over a multi-year time frame,” says Morningstar.
“Don’t get me wrong, I do think that these are great companies,” Yu says of SK Hynix and Samsung Electronics in an interview with
The Edge Singapore. He adds that both chipmakers have made significant progress and will likely remain as leaders in the memory space. Memory companies, however, are hyper-cyclical in nature, which means their performance can fluctuate over time.
“This price super cycle has gone on for eight quarters, so investors are assuming that memory prices will stay higher for longer. However, we expect memory prices to come down again after 2027 because the AI super cycle is not perpetual. It cannot last forever,” Yu adds.
Memory prices tend to follow a cyclical trend, and it is common for companies to be able to charge very high prices for three to four quarters, only for prices to drop sharply for the next three to six quarters.
“When we look at the forward price to book of the memory companies, we feel that they are at near or at record highs. But based on how we look at it in the future, it simply doesn’t make sense for them to continue trading at this multiple, or trading even higher than this multiple,” Yu says.
Morningstar’s forecast price to book valuation for SK Hynix in 2025 and 2026 is 3.6 and 2.6 times, respectively, and its actual price to book valuation in 2024 was 1.6. As for Samsung, Morningstar’s forecast price to book valuation for 2025 and 2026 is 1.5 and 1.4 times, respectively, and its actual price to book valuation in 2024 was 0.9.
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Macquarie and Nomura see further upside
Yu’s contrarian take on SK Hynix and Samsung sets him apart from most analysts, who believe that the best is yet to come for the two memory chip giants. Macquarie Equity Research (Macquarie) analysts Cherry Ma, Kaylin Tsai, Ellie Jiang and Daniel Kim say in their Nov 26 report that a shortage of dynamic random access memory (DRAM) and high-bandwidth memory (HBM) chips will set the memory sector up for a structural upswing.
Ma, Tsai, Jiang and Kim believe that the current upswing in the sector due to AI will last beyond 2026, unlike previous upturns that were shorter-lived. As AI companies begin to focus on bolstering the inference capabilities, rather than the pretraining, of their large language models, they will have a bigger demand for memory. The research house issued “outperform” calls for both SK Hynix (target price: KRW800,000) and Samsung Electronics (target price: KRW175,000).
Nomura’s Cindy Park, Eon Hwang, Siwoo Kim and Frank Fan make a similar argument in their Dec 10 note, saying that South Korean industries, including its memory sector, will benefit from the rise in capital expenditure due to AI. According to Nomura’s forecasts, the memory market will grow by 98% y-o-y to US$445 billion in 2026, and then by 32% y-o-y to US$590 billion in 2027.
“We believe this triple supercycle (commodity DRAM, NAND, HBM) that started in 2023 will last longer than previous cycles (which only lasted two to three years) until 2027, driven by both strong demand and limited supply,” Park, Hwang, Kim and Fan write in their report.
Nomura issued “buy” calls for both SK Hynix (target price: KRW840,000) and Samsung Electronics (target price: KRW150,000). “We expect Hynix to achieve significant cash reserves and book value improvement over the next two years, driven by ROE reaching 40%-50%. By the end of 2027, we project book value to reach KRW296 trillion, almost twice the current level,” says Nomura analysts CW Chung, Eon Hwang and Heesoo Min.
Notably, the analysts acknowledge that US tariffs on semiconductors and chip imports could prevent SK Hynix from achieving its target price. On Aug 6, US President Donald Trump said he plans to impose a 100% tariff on all semiconductors and chips entering the US. Companies that commit to or are already manufacturing their chips in the US will be exempt from the tariffs.
It is unclear whether and when the tariffs will be imposed. South Korea’s top trade negotiator, Yeo Han-koo, says SK Hynix and Samsung Electronics will not be affected by the tariffs.
Min Joo Kang, a senior economist covering South Korea and Japan for ING Bank NV, told The Edge Singapore at the bank’s media roundtable on Dec 9 that the probability of Trump pushing ahead with his tariffs is low. “On the tariff side, Trump kind of realised that. He kind of gave a more softer tone on essential goods imports, because it’s going to push up inflation.”
She adds that it is not tariffs on South Korea, but tariffs on Taiwan that will hit South Korean chipmakers hardest, as many of their high-end chips are exported to and processed in Taiwan before ultimately reaching the US market.
“We looked at the export details of Korea’s semiconductors. Last year, we saw a large jump in exports to the US. This year, what we see is really more intra-regional trade. So most of those high-end chips go to Taiwan,” Kang says. “So actually, it’s more important for Korean chipmakers to see how other countries’ tariffs will end up where.”
