Samsung and SK hynix Plunge: Earnings Problem or Not? Song Jong-ho's Diagnosis

For this check-in, Song Jong-ho joins to walk through the state of chip stocks and the industry.

Song is introduced as an expert who has analyzed the semiconductor industry for more than 20 years.

Song explained that because CoreWeave is the largest of the neoclouds, it is a key pillar of Nvidia's data center expansion, and the market took it very seriously.

Song said the technology gap with Chinese companies is very large. Chinese products are at the level of YMTC's third generation, two to three generations behind Samsung's 1c or hynix's 1b.

He judged that workarounds such as DUV double patterning carry a high risk of yield problems that would erode profitability. So he takes the position that the Chinese threat is unlikely to materialize and that concerns are exaggerated.

He also noted, separately from this assessment of the gap, that the pace of Chinese companies' catch-up is something to keep watching.

CXMT and YMTC's market share has risen to 10–15%. Song sees China as building its skills around a home-market base it already holds.

He explained that domestic smartphone and PC markets in China serve as that foundation. He added, however, that Chinese players have not yet entered HBM or enterprise SSDs.

Song's read is that AI investment has continued since ChatGPT in 2022, and in 2026 the industry has entered a phase of competition among AI agents. As the shift from Blackwell to Vera Rubin takes place, the transition from HBM3 to HBM4 is also underway.

He forecast that TSMC foundry capacity is sold out through 2028 and that memory is under long-term contracts with limited price swings, so the current picture should hold for a considerable period.

Song pointed to this shift and said it clashes with how investors see things.

Even so, concerns remain that oversupply will push prices down and that earnings could fall in the next or the quarter after next.

Based on 36GB, HBM4 is priced at $450, but the actual price charged to Nvidia and AMD works out to about $1,200, he explained.

Per-gigabit prices are rising from roughly $1.5 to about $4, and this increase will be reflected from the second half. Prices keep rising through HBM4E, HBM5, and GFM, and smaller vendors have not been able to enter this market.

The host began by confirming there is no need to doubt the industry's growth, but raised the point that individual investors' distrust has gone beyond a one-month blip.

One view holds that because those who took positions early keep insisting they are right while most give up, the stock could keep going for a long time. That clashes with the view that this is an opportunity.

Song's view is that when the market is strong, outlooks on themes such as energy can overheat it, so one should be careful. He noted that among New York hedge funds, too, old-school and younger views are split.

Right now, supply-demand and technical conditions have broken down, so one cannot expect support from something like the National Pension Service. In the end, sentiment matters, and he argues companies must actively pursue shareholder returns.

Companies have finished selecting underwriters, but he argued they must persuade investors with a valuation rationale.

As an example, he said that even if it lists at a $1,500 value, it could be advantageous if the market assigns it $300 billion. He also said Samsung Electronics should find a route such as amending the Geumsan Act to pursue shareholder returns.

He held that share prices should be judged on a book-value-per-share (BPS) basis.

On the average BPS of the past and current year, the stock rebounded from around 1.5x. He pointed out that hynix trades at about 1.3x price-to-book on next year's BPS of roughly 1 million won, while Samsung Electronics' share price looks low against next year's BPS in the upper 600,000-won range.

He sees the current stretch, below 1x price-to-book, as a zone where valuations are especially low.

Only Samsung Electronics and hynix are chip stocks that can be bought in Korea, which limits portfolio construction. Song sees this as a reason foreign buying has declined.

Foreign portfolios rank US big tech first, with Samsung and hynix below. He explained that Micron and SanDisk in the US are also included, splitting the weighting.

Concerns were also raised that money concentrating in single stocks has increased volatility. In that context, remarks were made that companies should pursue shareholder returns more actively and present concrete guidance.

The point was that single-stock and ETF-style approaches should not have been used.

The interpretation is that regulations forcing weight reductions regardless of valuation magnified the market shock.

Institutions also could not cut their weights, making additional buying difficult. Song forecast that if a single major foreign player changes its mind and returns to buying, the situation could flip 180 degrees.

Doubts were also raised over whether earnings are the trigger for that turn.

The counterpoint was whether the market had already priced in an expected decline in earnings.

This question led to a debate over how to read the gap between earnings and share prices.

He gave the example that companies with a dominant position can sustain high multiples, rather than judging only by valuation.

Just as Palantir's valuation can be explained above 200 times earnings, he concluded that with worries about entry into the used market and the collapse of oligopoly, fundamentals and valuation matter more now.

The host asked whether it is a mistake for individuals to absorb the shares that foreigners and institutions are selling. Song answered that some foreigners are also buying.

The key point of this passage is that the market is not moving in one direction across the board.