Amid Soaring Interest Rates, Semiconductors Still Lead; Data Centers and Power Equipment Are Next Bottlenecks

The emergence of AI technology in 2022 has spurred an investment cycle. As big tech companies increase hyperscaler investments, demand for AI-related products is surging. However, recent interest rate hikes have led to corporate bond issuance and credit issues, shifting the market environment from a simple technology investment perspective to a complex one that must also consider macroeconomic variables like interest rates.

The market is shifting from technology-driven to macro-driven. Mok Dae-gyun stated, "Ultimately, it started with a technology cycle, but isn't it now moving in a direction that connects with the macro cycle? It used to be simple. Big tech companies just invest. I would just look at that amount. But now, I think we are moving into a very complex macro cycle where we have to look at interest rates as well." This change adds complexity to investment decisions.

The speed and magnitude of the stock price decline at that time were analyzed to be stronger than during the IMF crisis, the financial crisis, and the COVID-19 pandemic. This sharp decline was the result of an adjustment fueled by a combination of leverage liquidation and hedge fund position closures.

Mok Dae-gyun noted, "At the end of July, when we were here, Samsung Electronics and SK Hynix were trading at about 4.5 times based on their expected earnings for the year... Looking at the speed and magnitude, it was a sharp adjustment. I think the bottom was confirmed in July." He assessed that a short-term bottom was confirmed in July, and the market is currently in a stabilization process.

When stock prices plummet, many negative factors often emerge simultaneously, leading to excessive concerns about structural risks. The market is currently in a process of finding the fair value of companies, with these negative factors already sufficiently reflected.

Mok Dae-gyun explained, "When stock prices plummet, many negative factors emerge simultaneously and multiply. Many people point out structural risks. So, isn't it a trend where we are seeking the fair value, what we call fair value, amidst all the bad news, reflecting both good assumptions and bad ones?" He analyzed that the market is digesting negative factors and building resilience within a trend of rising lows.

Investors who currently have no positions are carefully considering buying opportunities. Analysis suggests that the investment win rate can vary significantly depending on which leading stocks are bought during market corrections.

Mok Dae-gyun said, "People who don't have positions right now would be thinking a lot. Is this the buying bottom? Yes. I think a good time might come, and the win rate will definitely be different depending on which leading stock you buy during a correction." He added that high-point sellers are maintaining a wait-and-see attitude, and foreign investors are also not rushing.

Investors whose portfolio returns have recovered from the July low are increasingly eager to take profits. Their desire to reduce losses or secure gains is acting as a factor that moderates the pace of the market's ascent.

Mok Dae-gyun explained, "For those whose account returns have increased a lot, they are a bit impatient. So, if they recover a lot of their returns compared to the low we recorded in July, they start thinking, 'I'll just cut my losses or reduce my losses at this point,' which inevitably slows down the speed of the ascent." He analyzed that investors are adopting a conservative approach as macroeconomic uncertainty persists.

The Korean stock market is receiving positive evaluations, with a significant re-evaluation of corporate earnings alongside an index increase compared to past lows. A general re-evaluation appears to be underway across various industries, including defense and power equipment.

However, Mok Dae-gyun stated, "I still believe the Korean stock market is being re-evaluated. Corporate earnings themselves are being significantly re-evaluated, and countless industries, from defense to power equipment, are undergoing re-evaluation. However, at this current point, regarding whether it will go further, I cannot help but think that a speed adjustment may be necessary." He emphasized that a discussion is needed to justify the valuations of some sectors where stock prices have outpaced earnings growth, and a general market speed adjustment is necessary.

Investors are questioning whether HBM from Samsung Electronics and SK Hynix will exhibit cyclical characteristics or continue structural growth.

Mok Dae-gyun stated, "Ultimately, we will have to confirm the numbers. In the case of Samsung Electronics and SK Hynix, investors will question whether HBM will show cyclical patterns or structural growth, and they will carefully examine earnings from the second half of this year through next year." He predicted that foreign investors' high interest in shareholder return policies would be reflected in stock prices.

Samsung Electronics' move to secure ₩110 trillion in funds is positively evaluated by the market. However, there is lingering disappointment that the scale of shareholder returns did not meet market expectations, and the method, such as share buybacks and cancellations, was not what investors desired.

Mok Dae-gyun assessed, "Samsung Electronics, due to various circumstances, is not able to give a clear answer that the market wants right now. The scale of shareholder returns was a bit smaller than expected, and the method of shareholder returns is not what they want, such as share buybacks and cancellations. However, they did secure the funds, didn't they? ₩110 trillion, I think that's very positive." He pointed out that while securing the funds itself is positive, uncertainty still exists regarding the specific methods and speed of shareholder returns.

Analysis suggests that the single number where all investor ideas converge in the current market ultimately boils down to interest rates. Particularly, the 30-year Treasury yield serves as a crucial indicator in determining the market's direction.

Mok Dae-gyun stated, "Now, everything combined ultimately boils down to interest rates, doesn't it? In the market, all investor ideas converge and appear as a single number, don't they? I believe it will appear as the 30-year yield." He emphasized that interest rates are a key variable reflecting all market values.

The recent rise in interest rates above 5% is evaluated as a breach of the market's first line of defense. This is interpreted as a signal that the market is warning about fiscal deficits and persistent inflationary pressures. In reality, there is a surprising lack of buyers for bonds at these interest rate levels.

Mok Dae-gyun explained, "I think the key level has now passed 5%, meaning the first stage has been crossed. The market is issuing a warning. A warning about the fiscal deficit, plus a warning about persistent inflationary pressure, and in reality, there aren't as many buyers willing to purchase that capital as one might think." This could lead to increased interest rate volatility and market instability.

The corporate bond market has expanded significantly recently due to increased capital expenditures by big tech companies. Active fundraising for AI-related investments is creating a competitive dynamic with government bond issuance in the capital market.

Mok Dae-gyun stated, "The scale of the corporate bond market that big tech companies are issuing these days is unexpectedly large. Since corporate bonds that can be raised for AI are competing with government bonds, there seems to be some caution about this." He analyzed that the intensifying competition for capital raising between government and corporate bonds is creating caution in the market.

If funds for AI investment are raised through corporate bonds, it's possible with single-digit interest rates. If a return of 10% to 20% or more can be secured through this, it could be a viable game. However, currently, performance is not yet visible, creating market anxiety.

Mok Dae-gyun pointed out, "In the case of corporate bonds, the funding rate is currently single-digit, isn't it? The spread between the two is almost 10% to 20% positive, so if you are confident, you try to raise funds and make a profit, and it becomes a viable game. However, I am cautious about the current lack of momentum." He emphasized that proving the profitability of AI investments will be a crucial market challenge moving forward.

Market consensus for NVIDIA's revenue guidance is formed at around $100 billion to $106 billion. Some bullish investors are looking at $100 billion. However, due to these high expectations, there are concerns that even if NVIDIA announces results that surpass the consensus, the stock price may not react positively.

Mok Dae-gyun stated, "Looking at the revenue guidance, the market consensus is around $100 billion to $106 billion. Those who are very bullish often look at around $100 billion. Even if they exceed the consensus, I don't think the stock price will react positively. I think the market's expectations are too high." He analyzed that the market's expectations are so high that the stock price's sensitivity may change after the earnings announcement.

NVIDIA is gradually increasing its usage of HBM (High Bandwidth Memory). HBM usage is expected to reach approximately 33% in 2026, and this proportion is projected to rise to about 40% by 2028.

Mok Dae-gyun stated, "In NVIDIA's case, the proportion of HBM usage is gradually increasing. It was about 33% in 2026, and it could rise to almost 40% by 2028." This can be interpreted as a signal that HBM usage will increase across the entire related ecosystem, not just NVIDIA. It was emphasized that even if somewhat shocking statements emerge during the earnings announcement, it is important to approach it from a long-term growth perspective for HBM.

This specific approach is receiving positive evaluations from foreign investors.

On the other hand, Samsung Electronics, while positively viewed for securing funds, is evaluated as lacking specific methodology, failing to fully meet market expectations in terms of shareholder return scale and method. Mok Dae-gyun said, "Hynix seems to have met market expectations. And in its shareholder return method, it actually opened up the upside, didn't it? It was different in that it promised to invest more than 50% of free cash flow." He analyzed that the specificity of the shareholder return methods divided the market's reactions to the two companies. Foreign investors emphasize the predictability of such policies and evaluate comparative advantages.

Positive prospects for Samsung Electronics' revenue and quality are emerging through 2027, with corporate earnings also expected to trend upward. It is clear that it is one of the most undervalued companies in the global market.

Mok Dae-gyun emphasized, "I believe that revenue and corporate earnings are trending upward. When stock prices falter, Samsung Electronics is definitely one of the most undervalued companies globally." However, improving the predictability of shareholder return policies to secure investor trust remains a crucial task for a stock price rebound.

Semiconductors are still positively evaluated as a leading sector from a fundamental perspective. However, in markets that rebound after a sharp decline, there is a strong movement to find new leading stocks, and market focus can become dispersed. Particularly, a shift in the bottleneck from semiconductor equipment to power equipment is observed.

Mok Dae-gyun stated, "I view Samsung Electronics and SK Hynix positively from a fundamental perspective, but in terms of relative strength or stock price strength, I often think they might not perform as well as before in a market that rebounds after a sharp decline." Foreign capital is also exploring new bottlenecks, which could lead to a slight dispersion of focus from semiconductors.

Recently, data center construction stocks have been gaining attention, with estimated demand for data center construction in Korea reaching 18.4 GW. This translates to a significant monetary value and is expected to be a long-term cycle of about 10 years. The power equipment industry also appears to have entered a 10-year long-term cycle.

Mok Dae-gyun explained, "Recently, construction stocks have also been getting a lot of attention. In Korea, the demand for building data centers is 18.4 GW. How much is that in monetary terms? It's become a 10-year cycle. And the power equipment industry is also in a 10-year cycle, isn't it?" These industries have longer and more predictable investment cycles compared to semiconductors, making them attractive new long-term investment bottlenecks for investors, including foreign capital.