South Korean think tank: Chip boom offsets manufacturing weakness, South Korean economy still on recovery track
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South Korean stocks plunge 20%, nearing a bear market; the AI boom faces the awkward situation of "the more disastrous the earnings, the steeper the decline."
According to BlockBeats, on Wednesday afternoon, July 8th, South Korean stocks extended their losses as investors reassessed the outlook for AI demand. The KOSPI index fell by more than 6% at one point, breaking below 7200 points, and has cumulatively fallen by more than 20% from its all-time high last month, poised to enter technical bear market territory. Memory chip maker SK Hynix fell by as much as 5%, and Samsung Electronics fell by 6.9%. The Korea Exchange initiated a temporary trading halt on the KOSPI index, suspending algorithmic trading. South Korean stocks were among the strongest performing markets globally this year, but their performance is highly dependent on SK Hynix and Samsung Electronics, amplifying volatility when sector sentiment weakens. Even with Samsung Electronics announcing a 19-fold surge in quarterly profits earlier this week, chip stocks continued to be under pressure. Jordan Klein, a TMT sector expert at Mizuho Securities, stated that investors overreacted to Samsung's preliminary second-quarter results. He believes this sell-off in semiconductor stocks is more a sign of waning momentum than a deterioration in fundamentals. Klein stated that excluding one-off bonus expenses, Samsung's operating profit actually significantly exceeded expectations, with its storage business implied operating margin potentially exceeding 80%. He indicated that Samsung's single-quarter operating profit has already surpassed the total of the past three years, and reacting to Samsung's stock price based solely on preliminary results is "extremely short-sighted." Meanwhile, an AI trading rotation occurred in Asian markets. Hong Kong-listed Chinese stocks rose, with the Hang Seng China Enterprises Index rising as much as 3.4%, the Hang Seng Tech Index rising over 5% intraday, Alibaba rising over 8%, and Tencent rising over 3%. Market analysts believe that funds are flowing from crowded trades focused on AI infrastructure to markets with lower valuations and more value-oriented characteristics. Reuters' report on DeepSeek's self-developed chip and The Information's report on Zhipu AI considering designing its own AI chip further fueled this rotation. (Jinshi)
Rebellions, a South Korean AI chip startup backed by Samsung Electronics, plans to IPO in South Korea next year.
According to reports, Sunghyun Park, CEO of Rebellions, a South Korean AI chip startup backed by Samsung Electronics, stated that the company plans to IPO in South Korea in the first or second quarter of next year. Park said that Rebellions has already begun generating actual revenue, "and for this reason, we are working with the underwriting teams at JPMorgan Chase and Samsung Securities to prepare for the IPO." (Jiemian)
Nomura Securities: Market concerns about "overcapacity" may be excessive; South Korean chip investment is unlikely to quickly translate into production capacity.
According to Mars Finance, Nomura Securities analysts stated in a recent report that market concerns about "computing power oversupply" may be excessive, and the memory chip industry still has a long way to go before entering a downward cycle. The market is currently facing a severe shortage driven by artificial intelligence demand, with major chip manufacturers prioritizing the production of more profitable high-bandwidth memory (HBM), leading to limited supply of ordinary DRAM and NAND. Nomura analysts emphasized that in this context, concerns about oversupply are excessive. Because the semiconductor industry's construction and development cycles are often very long, projects announced by South Korean chip giants are unlikely to have a substantial impact on supply for several years. (Cailian Press)
South Korean chip stocks have extremely high leverage concentration; the SK Hynix leveraged ETF has assets exceeding four times its average daily trading volume.
According to Mars Finance, on July 5th, The Kobeissi Letter reported that leverage levels in South Korean chip stocks have spiraled out of control. The total assets of single-stock leveraged and inverse ETFs tracking SK Hynix are currently around $19 billion, more than four times the stock's average daily trading volume of approximately $4.5 billion this year. Meanwhile, leveraged ETFs related to Samsung have assets of approximately $12.4 billion, 176% higher than its average daily trading volume of approximately $4.5 billion. The Hong Kong-listed 2x long SK Hynix ETF has assets of approximately $13 billion, roughly twice SK Hynix's average daily trading volume, representing the largest gap among major stocks tracked by leveraged ETFs. In comparison, leveraged ETFs related to Micron (MU) have assets of approximately $9.9 billion, lower than its average daily trading volume of approximately $27.5 billion; leveraged ETFs for Tesla (TSLA) and Nvidia (NVDA) have assets of approximately $6 billion and $5.6 billion respectively, also significantly lower than their average daily trading volumes of approximately $23.6 billion and $28.8 billion. South Korean chip stocks have extremely high leverage concentration.
Analysis: The AI investment boom is cooling down, and the market is reassessing the sustainability of chip and data center spending.
According to Odaily Odaily, the AI infrastructure investment boom is cooling down, and the market is beginning to reassess the sustainability of chip and data center spending. As investors re-examine whether AI infrastructure investment can be sustained, "AI deals" covering the semiconductor, memory chip, and data center industry chain are showing signs of cooling. Recently, AI-related chip stocks such as Micron Technology (MU) and SanDisk (SNDK) have been under pressure. Samsung Electronics previously reported record second-quarter results, but revenue fell short of market expectations, causing its stock price to drop nearly 7%, dragging down the entire AI chip sector. Market concerns are growing that the current AI boom, driven by GPUs, high-bandwidth memory (HBM), and data center construction, may face repricing as cloud computing giants (Hyperscalers) may slow their investments in AI infrastructure. Meanwhile, South Korean memory chip giant SK Hynix's stock price has fallen about 25% from its all-time high ahead of its US IPO, which is also attracting some funds away from existing chip stocks. Analysts point out that after SpaceX's massive IPO boosted valuations of AI-related assets, investors are reassessing the growth logic for the next phase of the AI market. If the AI investment fervor cools further, some funds may flow back from the AI industry chain to other risky assets, including crypto assets. (CoinDesk)
"Big Short" Burry short of AI, calling South Korean chip investment "the beginning of the end."
According to Odaily Odaily, "Big Short" Michael Burry has recently expanded his short positions in AI-related stocks, with the latest disclosed short positions including Tesla, Caterpillar, Applied Materials, and an ETF that tracks chip manufacturers. Burry has maintained his bearish view on the AI sector for months, believing that related asset prices will face a correction after the AI hype cools down. In a recent Substack post, he stated that South Korea's announcement of a large-scale chip investment plan boosted chip stocks, but he believes this is "the beginning of the end," and questions whether the continued expansion of capital expenditures in the AI industry can ultimately translate into corresponding returns. (Wall Street Journal)