While KOSPI plunged below the 5,000 mark during intraday trading on the 6th, major domestic securities firms diagnosed that concerns about a decline in artificial intelligence (AI) investment that arose after the U.S. midterm elections were being excessively reflected in stock prices.
The heads of research centers at Mirae Asset, Samsung, Shinhan Investment & Securities and the NH Investment & Securities Research Center analyzed in Yonhap News on this day that anxiety over AI investment profitability and semiconductor demand has spread as the US Democratic Party's landslide victory in the midterm elections has highlighted the possibility of strengthening data center regulations.
In particular, it is said that selling was concentrated around AI-related stocks due to concerns that delays in data center construction could lead to a decrease in semiconductor orders and oversupply.
However, experts evaluated that considering the AI investment capacity of Big Tech (large technology companies) and the solid performance of semiconductor companies, it is difficult to conclude that the recent sharp decline is a sign that the growth of the AI industry is slowing down.
Some have raised cautious concerns that it will be difficult for investment sentiment to recover in the short term, as market concerns about AI investment have spread beyond funding issues to doubts about the possibility of recovering investment.
There were mixed views on the possibility of further decline in KOSPI. Samsung Securities suggested the 5,000 line as a short-term support line, but the index fell below it during the day, and Shinhan Investment & Securities pointed out the 4,500 to 4,800 line as the range where foreign selling may slow down.
Experts predicted that the stock market can begin a full-fledged rebound only when uncertainty about the specific direction of data center regulations and the profitability of AI investment is resolved.
◇ Yeonju Park, Head of Research Center, Mirae Asset Securities
= As concerns grew about strengthening data center regulations after the U.S. midterm elections, investment funds focused on AI-related stocks flowed out, and the decline expanded due to year-end profit-taking sales and hedge fund liquidation.
However, the profit-generating power of semiconductor companies remains solid. We believe that KOSPI has entered an undershooting phase, with its stock price falling excessively due to short-term supply and demand shocks while it is already undervalued relative to its performance.
Although company policy does not suggest a specific index level, short-term volatility may continue. However, it is expected to gradually normalize towards 2027.
AI has a significant productivity improvement effect and the potential market size is vast, making it different from the internet bubble of the past. Although there may be setbacks in the financing of some data centers, it is highly likely that the investment trend will be maintained as AI investment in big tech is a means of securing core competitiveness.
Semiconductors also have high performance visibility based on memory supply shortages and the high proportion of long-term supply contracts. Even if data center regulations in the United States are strengthened, the impact on facilities already under construction and scheduled for operation in 2027 is expected to be limited.
For investment sentiment to recover, the direction of data center regulation must be specified and Big Tech's AI monetization performance must be confirmed.
The current stock price already reflects the possibility of a significant decline in profits. Rather than chasing sales, we recommend diversifying investments in high-quality companies from a mid- to long-term perspective and avoiding leveraged investments.
◇ Seokmo Yoon, Head of Research Center, Samsung Securities
= The current market is overrepresenting fears that a slowdown in data center investment could lead to a decrease in demand for memory semiconductors, oversupply, and a decline in prices.
KOSPI's short-term support level was judged to be 5,000. The current index is below the 12-month expected price-to-book ratio (PBR) of 1x, so downward support is highly likely to appear unless the global economy enters a recession phase.
The market is excessively reflecting bad news that has not yet materialized. Even if memory demand slows, the extent of the decline may be limited if industry adjustments begin before supply expansion begins in earnest.
Even if data center regulations in the United States are strengthened, the impact on facilities that are already licensed and under construction and scheduled to operate in 2027 will be limited, and the full impact is likely to occur after 2028.
In order to restore investment sentiment, it is important that the credit default swap (CDS) premium of companies highly dependent on funding, such as NeoCloud (an AI computing infrastructure rental business) and Oracle, is stabilized.
It is estimated that the current stock prices of Samsung Electronics [005930] and SK Hynix [000660] reflect a 46% and 36% drop in memory prices, respectively.
As much of the negative news has already been reflected, further declines may be limited. At this point, there is not much profit from selling stocks, so it is necessary to wait and watch the market situation.
◇ Yoon Chang-yong, Head of Research Center, Shinhan Investment & Securities
= The current stock market correction is occurring as the burden of raising funds required for AI investment spreads due to doubts about the possibility of recovering investment.
With the US Democratic Party's landslide victory in the midterm elections, concerns about strengthening data center regulations have increased, and with news of Microsoft reconsidering some NeoCloud contracts, caution about investment profitability has increased.
The market's interest is shifting from whether it is possible to secure the funds necessary for AI investment to whether the actually built facilities can be operated as planned and generate sufficient profits.
As of 10 am on this day, KOSPI's 12-month forward price-to-book ratio (PBR) had dropped to 0.92 times. In the past downturn, foreign selling tended to weaken when the leading PBR reached 0.85 to 0.90 times.
Considering this, it is necessary to check whether foreign selling is slowing down around the KOSPI 4,500-4,800 range. However, the section may change depending on the lowering of corporate profit forecasts and the recovery of global funds.
Until the previous day, foreigners had sold domestic stocks on a net basis of about 22 trillion won over the past 20 trading days. In order for supply and demand to stabilize, the scale of new sales must decrease and the index must be confirmed to maintain its low point despite additional negative news.
At this stage, rather than aggressively expanding the proportion of stocks based solely on undervaluation, the priority is to manage leverage and liquidity burden and control the speed of new purchases.
◇ NH Investment & Securities Research Division
= After the U.S. midterm elections, as concerns spread about stronger regulation of the AI industry, all technology stocks, including semiconductors, plummeted. As the Nasdaq index broke away from the 200-day moving average and the volatility index (VIX) soared, it is believed that algorithmic selling and hedge fund liquidation overlapped.
However, once it is confirmed that policy concerns are excessive, the stock market is expected to stabilize again.
The Democratic Party also sympathizes with the competition for AI hegemony with China, so there is limited incentive to fundamentally block data center construction. The focus of regulations is also aimed at reducing the burden of electricity costs on residents rather than banning construction.
Even if the construction of data centers in the United States is delayed, demand for memory semiconductors is expected to remain solid as AI computing power can be secured by utilizing facilities in allies.
However, ahead of Antropic's large-scale initial public offering (IPO), global investment funds are moving to U.S. public stocks, which may put a strain on the supply and demand of domestic semiconductor stocks. It is expected that this burden will be alleviated once the public offering schedule is completed.
If international oil prices and U.S. government bond interest rates stabilize, the financing burden for AI companies may also be partially alleviated.
In terms of investment strategy, it is necessary to pay attention to the semiconductor industry, energy storage system (ESS), and power equipment industries, which suffered significant declines this week.
