Samsung Electronics and SK Hynix are expected to report record profits, but a sharp sell-off has exposed growing investor doubts over how long the AI memory boom can last.
Samsung Electronics and SK Hynix are entering their results season with a strange mismatch between business fundamentals and market sentiment. Both South Korean memory chipmakers are expected to post record quarterly profits, yet their shares have fallen sharply after October’s sell-off, leaving many recent buyers deep in the red. The contrast has turned the pair into a test case for the wider artificial intelligence trade: whether soaring demand for advanced memory still has room to run, or whether investors are beginning to doubt the durability of the boom. According to Reuters, SK Hynix will report on 28 October and Samsung on 29 October, and those figures are likely to shape trading for the rest of the year.
The decline in Korean chip shares has been severe. Samsung dropped 7.4% in a single session on 13 October, while SK Hynix fell by about 10%, as foreign investors unloaded large positions in both stocks. Reuters reported that the Kospi briefly slipped below 6,000 during that rout and later fell more than 2% on Friday to about 5,415, extending a second consecutive weekly loss. SK Hynix has been hit especially hard, with its share price far below its recent peak, and a large share of its shareholders now sitting on paper losses. That includes many retail investors who piled in during the stock’s rally earlier this year.
The reasons for the pullback extend well beyond South Korea. Investors have grown more cautious about whether hyperscale technology companies can keep funding record levels of spending on AI data centres, especially as borrowing costs rise. Reuters noted that Nvidia, AMD and other AI-linked stocks have also weakened, while the Nasdaq has come under pressure after earnings from Tesla and Meta Platforms did little to ease concern about AI-related spending. Higher US bond yields, a stronger dollar-sensitive cost of capital and inflation fears linked to firmer oil prices have all added to the pressure on growth stocks. In the memory market itself, there is also anxiety about future competition, particularly from China’s CXMT, which has signalled plans to advance server memory products.
Yet the operating picture remains exceptionally strong. Samsung said in preliminary results on 8 October that third-quarter operating profit could reach 12.1 trillion won, which would be its highest ever, on revenue of about 86 trillion won. Analysts surveyed by FnGuide expect SK Hynix to post its own record quarter, with operating profit of roughly 11.7 trillion won. The strength reflects tight supply and heavy demand for high-bandwidth memory, or HBM, the specialised chips used alongside AI accelerators from companies such as Nvidia. Micron, which reports earlier than the Korean firms and is closely watched as an industry guide, has said it does not yet see supply and demand returning to balance, reinforcing the view that the market remains tight.
Supporters of the stocks argue that valuations have now reset to more reasonable levels after the correction. Meritz Securities has estimated that SK Hynix’s projected price-to-book ratio for next year is close to historical lows. Both companies have also used share buybacks to support returns, although those programmes are now finishing, which removes a source of steady demand for the shares. SK Hynix completed its buyback earlier than planned and has said it will outline more shareholder-return measures with its results, a move that helped its stock recover modestly after it abandoned a review of a possible listing for Solidigm, its US storage subsidiary. Even so, sceptics warn that the memory business remains highly cyclical and that record profits may already be reflected in current valuations. What investors will watch most closely next week is not only profit, but also evidence that HBM demand, pricing and capital spending can stay strong enough to justify the market’s expectations.
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