It's Not an AI Slowdown... Interest Rates Trigger Semiconductor Correction [Click e Stock]

U.S. 10-Year Yield Nears 4.75%; Long-Term Rates Rise Globally

Surge in AI Bond Issuance Highlights Credit Cost Pressure

Semiconductor Outlook Hinges on Memory Prices and HBM Demand

Yonhap News

As semiconductor stocks wavered, concerns emerged in the market about a possible end to the artificial intelligence (AI) rally. However, the trigger for the latest correction was interest rates rather than a slowdown in AI demand. Analysts point to the fact that U.S. long-term Treasury yields are approaching 5%, and rising financing costs for AI data center investments have increased overall volatility among risk assets. Rather than a downturn in the semiconductor cycle itself, it was the bond market that rattled equities first.

On August 20, Mirae Asset Securities offered this assessment in its report, "Strategy for Responding to Volatility Triggered by Interest Rates." The report explained that the most recent adjustment reflected a greater impact from rising long-term interest rates and changes in credit costs, rather than concerns over the fundamental growth of the AI industry itself.

In practice, global interest rates are climbing alongside U.S. long-term rates. The yield on the 30-year U.S. Treasury surpassed 5.3%, and the 10-year yield rose to the 4.7% range. Long-term rates in Germany and the United Kingdom have also risen to their highest levels since the financial crisis. In Japan, the 30-year government bond yield has reached its highest point since 1999. This indicates that rising rates are not just a problem isolated to the United States, but a phenomenon occurring across major economies.

The market's heightened sensitivity stems from the nature of the current rate increases. If rates were rising due to a strengthening economy, it could have positive implications for the equity market. However, current concerns revolve around fiscal deficits, an increased supply of government bonds, and a widening term premium. There are underlying worries that, even if the U.S. Federal Reserve lowers policy rates in the future, long-term rates may not decline by the same magnitude.

The cost of AI investments is also amplifying interest rate sensitivity. AI-related bond issuance has reached $489 billion (about 680.3946 trillion won) this year, already surpassing the full-year amount of $322 billion from last year. As companies step up their fundraising needs for AI data centers and semiconductor investments, spreads in investment-grade technology bonds are also widening. The larger AI investments grow, the more the bond market and companies’ capital costs can impact the stock market.

However, there is no significant reason to interpret this development as a structural deterioration in the AI or semiconductor business cycle. Valuations for domestic semiconductor stocks are already considerably low. The forward price-to-earnings ratio (PER) for Samsung Electronics and SK hynix stands at 3.93 and 3.28 respectively, both lower than Micron’s 6.50 and the KOSPI’s 6.67.

Therefore, analysts say that the potential valuation burden from rising long-term rates for Korean semiconductor stocks is limited. While interest rates may drive short-term stock price volatility, the key variables determining the trajectory of domestic semiconductors remain memory chip prices, high-bandwidth memory (HBM) demand, changes in AI investment in facilities, and profit forecasts.

Mirae Asset Securities uses the U.S. 10-year Treasury yield as a key indicator for assessing market volatility. If the U.S. 10-year Treasury yield enters the 4.8–5.0% range, Mirae Asset warns that this could affect the relative appeal of stocks versus bonds and influence risk appetite, warranting short-term monitoring. However, they stressed that entering this range should not be interpreted as an immediate sell signal for domestic semiconductor stocks.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, “Since valuations for Korean semiconductor stocks have already declined sharply, if profit forecasts remain steady, the impact of rising rates on stock prices can be limited. Unless there is a meaningful change in the semiconductor industry outlook or profit forecasts, the latest stock price correction is more about short-term volatility driven by macro variables and supply-demand than a breakdown of the longer-term trend.”

This content was produced with the assistance of AI translation services.