Samsung Electronics' Shareholder Return Disappointment... Market Downward Pressure

As a result, investor disappointment with Samsung Electronics' shareholder return policy is believed to have formed.

Despite the principle of distributing half of the free cash flow to shareholders, the actual disclosed amount fell short of expectations, leaving investors feeling uncertain.

Currently, the domestic stock market is experiencing a sharp decline in transaction volumes and a decrease in deposits, indicating that individual investors are not actively participating in the market and are instead adopting a wait-and-see attitude. This weakening of investor sentiment is the biggest obstacle to stock market growth.

Even when positive news, such as from NVIDIA, is reported, stock prices do not gain significant upward momentum as they once did, suggesting a lack of overall market strength.

In particular, the market slump may continue around the Chuseok holiday period.

However, if Micron's earnings announcement at the end of September is positive, there is also an expectation that the market could show an upward trend starting from October, after traditionally weak September.

Under current law, shares exceeding a 10% stake must be sold.

If Samsung Electronics buys back and cancels its own shares, the shareholding ratio of Samsung Life Insurance and Samsung Fire & Marine Insurance in Samsung Electronics would relatively increase, potentially leading to a violation of the financial-industrial separation law.

Due to these legal restrictions, Samsung Electronics faces difficulties in enhancing shareholder value through aggressive share cancellations, and whether the government will apply the law flexibly to this issue is drawing attention.

NVIDIA provided revenue guidance of 70% growth for next year, significantly exceeding market expectations of 44%. This high guidance indicates that demand for AI accelerators is increasing much more strongly than anticipated.

Notably, the growth rate for non-hyperscaler customer groups, excluding big tech companies (i.e., countries or SMEs), reached 138%, showing a higher increase than hyperscalers. This signifies a diversification of AI demand sources.

This strong AI demand is expected to lead to an increase in memory semiconductor prices and have a positive impact on the overall semiconductor industry.

The market has consistently climbed after midterm elections, no matter who won.

This is interpreted as the resolution of uncertainties surrounding the election itself acting as a positive factor for the market.

While it is difficult to precisely ascertain China's semiconductor technology level, reports from securities analysts estimate the technology gap with Korea to be approximately three years.

Specifically, the market for high-quality data center chips is still dominated by Korean and U.S. companies.

Given the strong U.S. security regulations limiting China's semiconductor technology development, China is unlikely to pose a significant threat to the Korean semiconductor industry in the short term.

This is because top-tier components are essential for the stable operation of data centers.

However, while Samsung Electronics and Hynix have price-to-earnings ratios (PER) of around 5x, Samsung Electro-Mechanics' PER is between 50x and 60x, indicating a high valuation burden. Therefore, a cautious approach to new investments is advised.

AI investment is spreading beyond semiconductors to power infrastructure and the battery market. Sam Altman, CEO of OpenAI, also cited semiconductors (transistors) and power as the two bottlenecks for AI.

As the importance of power supply grows, with data centers consuming vast amounts of power considering building their own power plants, the scale of the Energy Storage System (ESS) market is expected to grow exponentially.

In the AI era, stable power supply and efficient energy management are essential, which will provide new growth engines for related industries.

The U.S. government is restricting the use of foreign-made, especially Chinese-made, products in large-capacity power grid facilities within the country through executive orders. There has been a movement to expel Chinese power equipment since the Trump administration, effectively making the use of Chinese memory impossible.

These U.S. sanctions are serving as a significant opportunity for Korean battery companies like SK On to expand their order contracts in the U.S. market.

If a domestic company invests in Westinghouse, the likelihood of Korean companies being chosen for many future nuclear power projects in the U.S. increases.

As Westinghouse plans to expand nuclear power plant construction within the U.S., establishing a strategic partnership through equity investment would provide significant advantages for domestic construction companies.

This collaboration is expected to serve as a stepping stone for domestic construction companies to successfully enter the U.S. nuclear power market by leveraging their technological capabilities.

The U.S. robotics industry, led by Tesla, relies heavily on Chinese-made components for many humanoid robot parts. However, the U.S. is considering excluding Chinese components due to reliability issues and security concerns like spy chips.

This move by the U.S. to reduce its dependence on China could create new opportunities for South Korean robotics component companies.

Korean companies are expected to be able to enter the U.S. robotics market's component supply chain and meet the demand for localization based on their technology and reliability.

The government is reportedly holding briefings for domestic construction companies regarding investment in the U.S. This reflects the government's desire for Korean construction companies to play a significant role in large-scale investments in the U.S.

If new facilities are built in the U.S., the justification for domestic construction companies to participate in such projects is expected to strengthen.

With the recent surge in indie brands, cosmetic original development manufacturing (ODM) companies are facing an inundation of orders. Major ODM firms like Korea Kolmar are reportedly experiencing bottlenecks due to overwhelming order volumes.

This situation is leading to the assessment that the cosmetic ODM industry is transforming into a structure similar to semiconductor foundries. In other words, with limited manufacturing facilities, many brands are requesting production, creating a supplier-driven market.

This includes semiconductors, power infrastructure, and AI-related facility construction sectors.

The remaining half of assets is recommended to be invested with 20% in high-dividend stocks (banks, securities), 10% each in cosmetic ODM and shipbuilding sectors, and the remaining portion in U.S. big tech companies.