Hardware-Led Growth, Active Investment Despite Rising Interest Rates

As the practical utility of AI agents has been proven, the stock market has formed a perception that a growth cycle, centered on hardware rather than software, is restarting. Data center rental fees have more than tripled compared to the past, significantly improving profitability. This situation serves as the backdrop for active investment, as investment efficiency is higher than rising funding costs.

Even with rising interest rates, major indices like the S&P 500 are reaching new highs. The market, which once relied on liquidity provision by the Federal Reserve, has now shifted to active infrastructure investments by corporations. An investment cycle accompanied by appropriate inflation and economic growth is analyzed to have taken hold.

Even as the Federal Reserve pursued tight monetary policy, the Treasury continuously intervened in the market by purchasing short-term bonds. This is interpreted as part of a liquidity provision program utilizing reverse repo funds. Irrespective of calls for interest rate cuts since the Trump administration, continuous government fiscal spending has contributed to maintaining market liquidity.

Despite concerns about token price declines since mid-August, market perception has shifted due to an explosive increase in AI demand. This is interpreted as an increase in overall usage, not a decrease in data generation costs. Like Jevons's paradox, semiconductor efficiency is expected to intensify competition, thereby long-term stimulating hardware demand.

It has been observed that an operating model capable of recouping investment in data center construction within one year has become established. Data center companies like CoreWeave and Nevius have successfully turned profitable, demonstrating this trend. As long-term contracts from three years ago come up for renewal, rental income has surged, with rental fees rising more than threefold compared to the past, generating profits far exceeding procurement costs.

The stock market tends to move by constantly seeking new triggers and narratives. While a narrative is forming that Samsung Electronics' earnings announcement in October will be a turning point for a rebound, the market is paying more attention to unexpected variables like Astra rather than obvious earnings announcements. The common thread in market interpretations converges on expectations for expanded AI data center capital expenditure (CAPEX).

Bond investors anticipate interest rate hikes due to inflation concerns, while stock investors are optimistic about corporate growth and view the market positively. In the bond market, there is significant dissatisfaction due to the loss of expectations for interest rate cuts, but currently, optimism in the stock market generally prevails.

Major semiconductor companies, including TSMC, Samsung, Hynix, and Micron, have all embarked on expansion competition. Considering large-scale investment plans such as the Yongin fab, orders for semiconductor equipment are expected to continue until 2029.

The current gap, discounted by over 40% compared to Micron, needs to be narrowed. CEO Lee Kwon-hee recommends holding 40-50% of the portfolio in Samsung Electronics, Hynix, and materials, parts, and equipment (Soo-bu-jang) companies combined.

The core of the secondary battery industry has shifted from electric vehicle batteries to ESS (Energy Storage Systems). The termination of Samsung SDI's joint venture agreement with GM is interpreted not as a setback, but as a positive sign for the expansion of its own ESS production plants. A strategy of utilizing the current adjustment period as a buying opportunity is effective.

The secondary battery sector currently has high valuations. Therefore, it is necessary to approach it from a trading perspective until this year. It is recommended to focus on set manufacturers such as Samsung SDI and SK Innovation, while material stocks like EcoPro, EcoPro BM, and L&F are showing weakness due to funding issues. A trading strategy of partial selling in the 20-30% profit range is effective.

Amid plans announced for the construction of 8 nuclear reactors in the US, it is highly likely that the second major investment in the US will be in nuclear power. While disputes regarding Westinghouse and APR1400 technology continue, a model is being proposed where South Korean capital constructs nuclear power plants and shares operating profits. Discussions on whether to apply AP1000 or 1400 technology are active.

Concentrated investment is recommended, focusing on three stocks: Doosan Enerbility, KEPCO E&C, and BHI. In the SMR (Small Modular Reactor) sector, there is also the possibility of demand from the US Department of Defense. It is analyzed that nuclear power plant design and manufacturing companies are in a more advantageous position than power maintenance companies (such as KEPCO KPS).

Cases of technology exports worth 4.4 trillion won have already occurred, supporting this outlook. Diversified investment through Bio TOP 10 ETFs is recommended. As such technology export cases continue to emerge steadily, the entire sector is likely to rise when the atmosphere revitalizes.

Rather than being swayed by negative market outlooks, this is analyzed as a time to take risks. When macroeconomic issues such as the Middle East situation subside, stock prices are expected to rise to the next level. Investors with a current cash ratio of 50% need to reduce this to 20-30% and increase their stock holdings.