Why Samsung, SK hynix shares are soaring

Samsung Electronics headquarters in Seoul / Yonhap

Shares of Samsung Electronics and SK hynix are soaring on the back of strong foreign buying and a global tech boom, market watchers said Monday.

The performance reflects a deeper shift in investor sentiment. Information technology (IT) and semiconductor manufacturers’ shares are rallying, buoyed by strong earnings forecasts amid heavy investment into artificial intelligence (AI).

The rally of Samsung Electronics in particular will remain strong, underpinned by a Morgan Stanley report recommending overweight, indicating a further price increase in the coming months.

The global investment banking powerhouse said the Samsung shares are its top pick, revising its target price to 96,000 won ($69), up from the earlier 86,000 won.

The firm said in the latest report that the IT sector will face a “a warm winter,” a notable shift in characterization from five months ago when it said an “iceberg looms.”

Samsung Electronics shares tanked to below 50,000 won in November last year from the previous peak of 88,800 won in July that year. The steep two-month fall was triggered by Morgan Stanley’s previous report titled “Winter is coming,” in which it revised down the target price to 76,000 won from 105,000 won.

“IT shares are expected to remain strong,” Korea Investment & Securities analyst Kim Dae-jun said.

Kim noted that the IT industry has generated the highest returns among all sectors, outperforming other industry shares.

“Over the past 20 sessions, IT shares outstripped those of other industries by nearly 9 percentage points. Central to the robust performance were the U.S. tech sector growth, including the so-called ‘magnificent seven’ shares in the U.S.,” he said, referring to Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla.

The global IT and tech shares boom is good news for Korean components and display manufacturers, according to Park Kang-ho, an analyst at Daishin Securities.

“AI investment leads to improved industry conditions domestically and globally, since the ongoing rise in semiconductor stocks is now extending to include companies in electronic components,” he said. “We maintain an overweight recommendation for the sector. The positive outlook will continue through late this month, despite the potential short-term market correction. The third-quarter earnings will likely exceed previous estimates.”