Brokerages Stay Bullish on AI-Driven Memory Demand Despite Middle East Conflict
Despite ongoing geopolitical tensions in the Middle East impacting global equity markets, brokerages worldwide are increasing their price targets for South Korean chip giants Samsung Electronics and SK hynix. The optimistic outlook is fueled by the expectation that robust demand for artificial intelligence (AI) memory chips will significantly boost earnings growth for these leading semiconductor companies.
Investor sentiment, however, has been shaken by recent US-Israeli strikes on Iran, leading to substantial foreign selling and a subsequent decline in share prices for both Samsung and SK hynix.
As of Monday’s market close, Samsung Electronics’ shares had decreased by 12.84 percent this month to 188,700 won ($125), underperforming the benchmark Kospi’s 11.2 percent drop during the same period. Similarly, SK hynix experienced an 8.2 percent decrease, settling at 974,000 won.
While both stocks showed a slight rebound, rising between 2 percent and 7 percent on the day, the recovery has not yet gained significant traction.
Nevertheless, the overall market outlook for the semiconductor industry remains positive, largely driven by the increasing demand for chips utilized in AI applications.
According to Investing.com, Goldman Sachs recently revised its target price for Samsung Electronics upwards from 205,000 won to 260,000 won, representing an approximate 27 percent increase. The brokerage reaffirmed its “buy” rating for the stock.
Goldman Sachs also raised its operating profit forecast for Samsung Electronics this year to 23.9 trillion won, up from 18.1 trillion won, citing rising prices for commodity DRAM and NAND memory. The firm projects that Samsung’s return on equity could reach around 37 percent, nearing a record high.
In addition, Goldman Sachs increased its target price for SK hynix from 1.2 million won to 1.35 million won, a 12.5 percent increase. The company’s operating profit forecast was also revised upward to 20.2 trillion won from 16.9 trillion won.
Domestic brokerages have followed suit, increasing their price targets for the two leading chip manufacturers. On average, brokerages now target a price of approximately 250,000 won for Samsung Electronics and around 1.33 million won for SK hynix, reflecting increases of about 6 percent and 3 percent, respectively, compared to a month earlier.
KB Securities presented one of the most optimistic forecasts, raising its target price for Samsung Electronics by 33 percent to 320,000 won and increasing its target for SK hynix by 21 percent to 1.7 million won.
“Samsung Electronics, having entered a full-fledged earnings cycle, appears to be in the early phase of a valuation re-rating as its earnings growth gathers pace,” stated Kim Dong-won, head of research at KB Securities, highlighting the limited supply growth for DRAM and NAND flash in the face of rising demand.
Ryu Hyung-keun, an analyst at Daishin Securities, suggests that SK hynix shares appear undervalued at their current levels and possess several catalysts for a rebound.
He added that further momentum could be gained following the upcoming earnings report from Micron Technology, the world’s third-largest memory manufacturer behind Samsung Electronics and SK hynix.
“Despite stronger business competitiveness, SK hynix is trading at a cheaper valuation than Micron,” Ryu said, emphasizing that the upcoming earnings report could increase investor interest in the Korean chipmaker.
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