Chip Outlook’s Crucial Test: Peak or Supercycle?

Samsung Electronics and SK Hynix, global leaders in semiconductor memory, face a pivotal period. Investors are divided: is the current memory boom peaking, or is it transitioning into a prolonged, AI-driven supercycle? The answer hinges on upcoming financial reports from key industry players.

The semiconductor industry’s near-term outlook for these Korean chipmakers will largely be shaped by results from ASML and TSMC this week, followed by major big tech firm earnings and their crucial capital expenditure plans later this month. This series of announcements comes after a recent sharp selloff in chip stocks, fueled by profit-taking and lingering peak-cycle concerns.

Offering a more optimistic perspective, the Bank of Korea (BOK) on Monday reinforced the bullish view, stating that semiconductor demand is currently outpacing supply, driven significantly by global technology companies expanding their AI infrastructure investments.

“Semiconductor demand has increased significantly due to AI infrastructure investment, while the pace of supply expansion has remained slow,” the central bank noted in a written response to Rep. Park Sung-hoon of the ruling Democratic Party, underscoring the robust demand for AI chips.

The BOK further explained that the current market upturn distinguishes itself from previous cycles. This is because competitive AI investment is fostering structural demand, particularly for advanced chips like high-bandwidth memory (HBM), which require extended development and production periods, ensuring a longer growth trajectory.

Forecasting a sustained expansion, the Bank of Korea anticipates the global chip industry will remain in an upturn “for a considerable period.” The current growth cycle has already extended for 40 months since March 2023, surpassing the 29-month average observed across five expansion cycles between 2000 and 2020.

Despite these positive indicators and chipmakers posting record earnings with elevated memory prices, concerns about a potential peak in the cycle have continued to mount among some investors.

Samsung’s record second-quarter results clearly demonstrated the strength of the ongoing upturn but did little to fully alleviate fears that its earnings growth might have reached its fastest pace. Investors are increasingly scrutinizing whether memory price gains and profit estimate upgrades can truly be sustained, a factor weighing on both Samsung and SK Hynix shares despite their strong underlying fundamentals.

Reflecting these market anxieties, the Kospi dropped below the psychologically important 7,000 mark on Monday afternoon, sliding to 6,793.25 by 2:30 p.m., as a circuit breaker briefly halted trading amid broader market panic. SK Hynix plunged 14.5 percent, falling below 1.9 million won ($1,260), while Samsung Electronics shares decreased as much as 10.53 percent to 255,000 won during Monday’s trading session.

SK Hynix’s strong Nasdaq debut, however, offered a glimmer of support. Its US depositary shares (ADRs) closed 12.8 percent above their offer price, trading at a premium to the Seoul-listed stock. Nonetheless, analysts cautioned that the listing provided limited concrete evidence regarding the further trajectory of the memory cycle.

“The ADR listing does not necessarily signal an immediate change in the memory cycle, but it could help revive sentiment toward semiconductors and the broader Kospi,” commented Han Ji-young, an analyst at Kiwoom Securities, on the market’s reaction to SK Hynix’s expanded presence.

Yang Ji-hwan, head of research at Daishin Securities, remains optimistic, asserting that the chip industry is firmly in the early to middle stage of an upcycle driven by AI demand.

“AI is fundamentally changing the nature of memory supply and demand, and this extreme imbalance will drive further price gains and robust earnings growth for semiconductor companies,” Yang stated, highlighting the transformative impact of artificial intelligence.

Analysts widely agree that the performance of the semiconductor sector over the next several weeks will be crucial. These upcoming announcements are likely to determine whether investors fully re-embrace the AI supercycle thesis or continue to price in a peak in memory earnings.

ASML and TSMC will provide the first significant signals this week through their order books, capital spending plans, and demand outlook. Their guidance will offer an early and vital indication of whether leading chipmakers and foundries still anticipate strong, sustained AI-related investment across the ecosystem.

The more decisive test for the AI-driven memory boom will emerge later this month from major tech giants like Microsoft, Alphabet, Amazon, and Meta. Their earnings reports and updated capital expenditure plans will clearly show whether spending on AI servers, data centers, high-bandwidth memory (HBM), and advanced processors remains intact and is set to accelerate.

“Chip stocks are likely to trade within a broad range for some time before attempting another significant advance,” advised Na Jeong-hwan, an analyst at NH Investment & Securities. “A sustained rebound will require further earnings upgrades and compelling evidence that AI demand remains strong, with Big Tech continuing to expand its capital spending aggressively.”

The two leading Korean chipmakers may respond differently to these critical signals. Samsung Electronics has greater exposure to conventional DRAM and NAND flash memory markets, while SK Hynix remains the purer investment bet on high-bandwidth memory (HBM) and specialized AI accelerators, positioning both uniquely within the evolving AI landscape.