KB Securities predicts increased demand for memory semiconductors as AI model competition intensifies... Samsung Electronics and SK Hynix expected to benefit the most

(Seoul = Yonhap News) Reporter Jeong Hoe-in = KB Securities predicted on the 9th that as competition in the performance of global artificial intelligence (AI) models intensifies, demand for memory semiconductors will increase significantly, and that Samsung Electronics [005930] and SK Hynix [000660] will benefit the most.

Kim Dong-won, head of research at KB Securities, said, "The U.S. frontier model will raise the top of AI performance, and the Chinese high-efficiency model will expand new users and frequency of use with low inference costs. As competition in AI model performance intensifies, the increase in structural demand for memory is expected to further accelerate."

The explanation is that when American companies release higher-performance AI models, the amount of calculations and data processing required to process a single question or task increases, and memory usage also increases accordingly.

Conversely, if Chinese companies spread low-cost AI models, the number of users and the number of uses will increase, leading to an increase in the overall amount of AI calculations.

KB Securities predicted that thanks to this trend, a strong upward cycle will continue in the memory market next year, with both price increases and shipment increases. As new supply is limited, memory supply is expected to become even tighter.

It is expected that aggressive AI investments by large technology companies will continue for the time being.

Currently, the free cash flow (FCF) of hyperscalers (big tech companies that operate large-scale data centers and cloud services) such as Amazon and Google is decreasing due to increased investment in AI infrastructure, but it is expected to improve again from 2028 due to increased cloud utilization rates and price increases.

KB Securities evaluated, “The time is approaching when large-scale AI investments go beyond simple cost increases and translate into increased cloud sales and profits in the mid- to long-term.”

By 2028, the share of Amazon and Google's cloud business in total operating profit is expected to increase to 61% and 45%, respectively.

He went on to suggest Samsung Electronics and SK Hynix as top stocks, saying, “A strong upward cycle in the memory market next year will be the key driver of record-high performance.”