Samsung, SK hynix expect early rebound due to Nvidia earnings surprise

The Korea Times

The Korea Times

Finance

Thu, November 30, 2023 | 22:44

Markets

Samsung, SK hynix expect early rebound due to Nvidia earnings surprise

Posted : 2023-08-25 15:42

Updated : 2023-08-27 09:11

Samsung Electronics' chip manufacturing facility in Pyeongtaek, Gyeonggi Province / Courtesy of Samsung Electronics

By Lee Min-hyung

Shares of Samsung Electronics and SK hynix are forecast to achieve an earlier-than-expected recovery as a consequence of Nvidia's robust earnings growth, as demand for memory chips will rise in line with the U.S. firm's surging sales of its artificial intelligence (AI) computing solutions, market analysts said.

The two representative tech stocks of Korea have been lackluster from the third quarter, hit hard by the falling semiconductor revenue. Samsung suffered an operating profit decline of 95.3 percent in the second quarter from a year earlier. Its sales also dropped by 22.3 percent amid sluggish recovery on the price of its cash-cow memory chips.

After hitting this year's high of 73,600 won ($55.47) per share in July, Samsung shares have been on a gradual decline. The stock value of SK hynix, the second-largest memory chipmaker here, has also made little progress. Shares of the SK affiliate hit a high of 129,000 won last month, but have since failed to make any meaningful rebounds.

However, Nvidia's latest earnings result rekindled hopes that Korean chipmakers might see a faster earnings recovery. SK hynix has started providing samples for its fifth-generation high bandwidth memory (HBM) to Nvidia, and Samsung is also planning to launch its latest HBM sometime in the latter half of this year.

The rosy outlook pushed local brokerage houses to raise the target prices of the two chipmakers.

"Samsung's device solutions division (handling chip production) will enter a path for solid earnings recovery from the third quarter of this year, as memory chip shipment is widely forecast to widen on the overall demand growth particularly driven by AI server," Kim Kwang-jin, an analyst at Hanwha Investment & Securities, said.

The securities firm raised Samsung's target stock price to 94,000 won per share from 82,000 won.

"The company will regain the spotlight thanks to its competitiveness in the AI server market from a mid- to long-term viewpoint," the analyst said.

According to data from market research firm, TrendForce, SK hynix topped the list in the global HBM market share with 50 percent last year. Samsung came in second with 40 percent. Their combined market share will also expand further to around 95 percent by next year, according to data from the Taiwan-based market tracker.

Hana Securities also recently revised SK hynix's target stock price up to 158,000 won from 115,000 won, citing its global competitiveness in the HBM market.

mhlee@koreatimes.co.kr