“We’ve Hit Bottom”: Samsung Electronics and SK hynix “Undervalued at Global Financial Crisis Levels” Set for W-Shaped Rebound - But When? [Weekend Money]

Analysts say the domestic stock market, which plunged over the past four months amid foreign selling and external factors such as interest rates and oil prices, has passed the peak of concern after hitting lows twice. With the valuations of the KOSPI, Samsung Electronics and SK hynix at historic lows, the expectation is that uncertainty will ease after the U.S. midterm elections in November, setting the stage for a W-shaped rebound.

In a report titled “Semiconductor Concerns Pass Their Peak: Focus on a W-Shaped Rebound,” Kim Dong-won, an analyst at KB Securities, said, “We believe the KOSPI formed lows on July 29 (5,262 points) and October 15 (5,450 points), confirming a W-shaped bottom.” He added, “This is the time to focus on the upside potential from valuation normalization rather than downside risks at current prices.”

Since reaching a high of 9,114 points on June 22, the domestic stock market has fallen 37.1% over four months, as increased foreign selling coincided with macroeconomic volatility, including fluctuations in interest rates and oil prices. During this period, the KOSPI’s price-to-earnings ratio (PER) fell to around 4, entering an extreme undervaluation phase comparable to that of the global financial crisis. In particular, the projected 2027 PERs for Samsung Electronics and SK hynix fell to around 3.3 and 2.7, respectively. While earnings forecasts have remained solid or been revised upward, share prices alone have plunged, widening the gap between the two indicators to a historic low.

Market attention is expected to shift from interest rates to inflation, and from supply and demand to earnings. “The valuations of the KOSPI, Samsung Electronics and SK hynix have entered historically undervalued territory, falling below levels seen during past financial crises. We believe the U.S. 10-year Treasury yield has formed a short-term peak in the mid-5% range, making it increasingly likely that the pace and trajectory of further rate increases will moderate,” Kim said. “Concerns about the financial health of neocloud providers such as CoreWeave have been excessively priced in, and uncertainty over the sustainability of AI investment will gradually ease.”

Kim also pushed back against concerns that AI investment could be scaled back if Democrats take control of Congress in the U.S. midterm elections scheduled for November 3. “Regardless of the election outcome, the structural expansion of investment in AI infrastructure is likely to continue,” he said. “AI-related investment has become a key driver of U.S. economic growth, with its contribution to growth estimated at 40%. Both Republicans and Democrats also share bipartisan support for the strategic goal of securing a technological edge in the AI rivalry with China.” He added, “Even if Democrats gain control of Congress, safety and environmental regulations for AI data centers and oversight of investment could be strengthened. However, the likelihood that the fundamental direction of the national strategy to secure AI leadership will change is limited, and market uncertainty about AI investment will gradually ease after the midterm elections.”

Demand for semiconductors used in AI servers remains strong, and the shortage of AI semiconductors is expected to continue through 2028. “After the U.S. midterm elections in November, uncertainty over AI investment will ease, and the earnings outlook for Samsung Electronics and SK hynix will become clearer,” Kim said. “As the unusual gap between earnings and share prices narrows, a full-fledged W-shaped rebound is expected to take shape in November and December.”

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