South Korea's leading chipmakers staged a dramatic comeback on Friday, with SK Hynix jumping nearly 28% and Samsung Electronics climbing 25%, propelling the KOSPI index up more than 16% and triggering a trading halt. The surge followed a brutal three-session selloff that had erased roughly 17% from the index, as investors fled risk assets amid fears of an AI spending slowdown.
Big Tech earnings spark relief rally
The catalyst came from across the Pacific. Microsoft's forecast for Azure growth and Amazon's report of its fastest AWS expansion in over four years, coupled with raised capital-expenditure plans, reassured markets that hyperscalers remain committed to building out AI infrastructure. That demand underpins the high-bandwidth memory (HBM), server DRAM, and storage chips produced by Samsung and SK Hynix. The Philadelphia Semiconductor Index jumped more than 8% on Thursday, setting the stage for the Asian rebound.
“Both the earnings as well as the sentiment are kind of coming back,” said Fabien Yip, market analyst at IG, in a Reuters interview. He argued that the AI demand story remains intact and that the earlier selloff may have been an overreaction to capex concerns.
Fundamentals remain solid, but expectations are high
Underlying business conditions still look supportive. Samsung recently reported record quarterly profit and expects HBM4 revenue to more than triple in the third quarter. SK Hynix continues to benefit from tight advanced-memory supply and long-term supply agreements. Yet the rebound does not erase the valuation question that triggered the initial downturn. Even record earnings had disappointed investors earlier in the week because expectations had run ahead of actual results.
Kiwoom Securities analyst Park Yu-ak trimmed his Samsung target to 390,000 won from 430,000 won on July 8, warning that component inflation and cautious electronics customers could slow memory purchases. He sees volatility rising as second-half earnings growth moderates.
Morningstar equity analyst Jing Jie Yu offers a more balanced view. She expects the current memory upcycle to remain “substantially stronger” than previously forecast, supported by tight supply, AI demand, and longer customer contracts. However, she also notes that heavy investment will likely expand capacity over the next two years, setting the stage for another downturn around 2029-2030. Chinese manufacturers pose an additional risk if they narrow the technology gap and flood the market with lower-priced conventional DRAM.
Leverage and short covering could fuel whipsaw
Market structure may pose the most immediate threat. Leveraged products tied to Samsung and SK Hynix amplified the rally earlier this year but accelerated losses when prices reversed, forcing investors to unwind positions. Regulators in South Korea and Hong Kong have tightened controls after extreme volatility. CSOP Asset Management plans to introduce flexible leverage on products tracking the two chipmakers, while Korean authorities are considering stricter limits on retail exposure.
Friday's surge may have corrected an excessively pessimistic market, but it does not confirm a durable bottom. The rally was partly driven by short covering and leveraged positioning, which can reverse quickly. As seen in recent sessions, sentiment can shift violently. For context, the DRAM ETF slide highlighted how quickly memory stocks can fall despite strong inflows.
Investors should also watch whether the AI trade can sustain momentum. The Nvidia rebound after Microsoft's earnings suggests optimism is returning, but the earlier losses show how fragile sentiment can be. While Samsung and SK Hynix have powerful AI-driven earnings stories, the path forward is likely to be bumpy.
This article is for informational purposes only and does not constitute financial advice.
