Hyungsoo Lee, CEO of HSL Partners. Reporter Cho Young-cheol
“I think the rally will continue until the end of the year and into the first half of next year. The outlook for 2027 is mixed, so it is a phase where it can safely rise until the first half of next year. If the proportion of semiconductors is small in the current portfolio, it is recommended to increase it before the second rally comes.”
This is HSL Partners CEO Lee Hyung-soo’s recent assessment of K-Semiconductor’s stock price. Samsung Electronics hit a 52-week high at 94,400 won on the morning of October 10, the day after the Chuseok holiday, and SK Hynix also broke its previous record at 439,250 won during trading on the morning of the 10th. CEO Lee is an IT (information technology) and semiconductor investment expert who has published books such as ‘The Strongest AI Revolution Investment You Can Use Right Away’ and ‘AI Ten Beger Investment’, and runs the YouTube channel ‘IT God Lee Hyeong-soo’. We asked CEO Lee about the K-Semiconductor Big 2 stock price outlook and the AI (artificial intelligence) revolution.
SK Hynix price rises to the mid to upper 400,000 won range
What is the biggest reason for the rapid rise of Samsung Electronics, which maintained its price at around 50,000 won until the first half of the year?
“The most important reason is Amazon’s increased investment in general servers. The replacement cycle has arrived following 2017-2018. At the time, the lifespan was predicted to be 3-4 years, but the lifespan was being extended by improving software and replacing only some parts of the hardware. So even experts could not predict when the replacement cycle would arrive. Then, Amazon initially The order quantity was twice as large as expected. “The replacement cycle will begin in earnest, focusing on big tech companies that made investments at the time, such as Microsoft and Google.”
How far will Samsung Electronics’ stock price rise?
“Breaking the previous high (96,800 won during intraday trading) seems sufficient. For the pace to accelerate, there must be a ‘new deal’ in the foundry business, like the contract with Tesla worth 22.8 trillion won.”
Couldn’t Samsung Electronics’ passing the NVIDIA Qualification Test be a new turning point?
“It is collectively called a qual test, but there are several stages. There is a major stage of submitting engineering samples and a stage of submitting customer samples, and the latter is important. Engineering samples appear to have passed all three memory companies, and only SK Hynix appears to have passed customer samples. Samsung Electronics and Micron’s customer samples are expected to pass next year. “I think it could be pushed back to seconds.”
SK Hynix’s stock price fell by more than 8% in July due to the ‘Goldman Sachs shock’.
“Goldman Sachs said that there would be an oversupply of HBM (High Bandwidth Memory). However, within three months, the mood changed to say that supply would not easily increase. The unexpected recovery in demand in the storage sector played a big role in the background of the stock price touching 400,000 won. SanDisk and Western Digital. Increasing the price of hard disk drives (HDDs) has sparked demand for enterprise-type solid state drives (SSDs). SK Hynix has strengths in SSDs based on quadruple level cells (QLC). Looking at the market share, SK Hynix is 36%, Micron is 17%, and Samsung Electronics is 9%. “As Samsung Electronics is having difficulties developing the 9th generation QLC, SK Hynix is benefiting more.”
How much do you expect SK Hynix to rise?
“Next year’s operating profit estimate is in the mid-50 trillion won range, but I think it could rise further to the mid-to-high 400,000 won range.”
Over the past month, foreigners have net purchased a total of nearly 9 trillion won in the two stocks.
“It is a type of foreign FOMO (Fear of Missing Out). As unexpected demand for memory semiconductors arose, most foreign investors had to increase their investment ratio. I believe this is why the price surge occurred. As the supply and demand of foreign investors and institutional investors was concentrated in a short period of time, the speed of purchases slowed down once the proportion reached a certain level. It will. “I think there will be a second rally starting at the end of the year, and if a correction occurs before then, it is an opportunity to invest.”
Revival of semiconductor front-end process
How can I hide the stones?
“Supply and demand are likely to focus on areas where fundamentals are improving, centering on semiconductor materials (materials, components, equipment). So far, trends in materials and materials have been focused on post-processing. That has led the AI cycle, and a superstar called Hanmi Semiconductor has emerged. In the rally from the end of the year to next year, ‘old school’, exposure, deposition, and etching. It is expected that stocks related to the front-end process will rise significantly. “We are paying attention to companies such as ASML, Tokyo Electric, TES, TCK, Lam Research, and Hana Materials.”
Are there any points to watch out for when investing in semiconductors until the first half of the year?
“What could be a variable is China’s general-purpose memory supply. Companies such as Changshin Memory (CXMT) and Yangtze Memory (YMTC) are trying to enter the server chip or HBM market. In the second half of last year, CXMT poured out DDR4 volumes, turning prices into a red ocean. However, even in China, cloud companies are facing stability issues. “There is a tendency to reduce CXMT orders, so I don’t think there is a high possibility that Chinese memory supply will increase until the first half of next year.”
NVIDIA stock price is moving sideways at the $190 level. Will AI maintain its position as a leading stock?
“The key is how quickly sovereign AI demand emerges. Big Tech’s capital expenditures can be seen as already reflected in the price. We need to see how quickly sovereign AI demand emerges in the United Arab Emirates, Saudi Arabia, Korea, Japan, Europe, India, etc. If so, NVIDIA may rise further. TSMC, SK Hynix, etc. The same goes for ‘triangular alliance’ companies. If the pace of Sovereign AI development is slow, there is a possibility that NVIDIA will rise moderately and AI software will rise further. Then, the stock prices of companies like Palantir will rise further.”
There is constant controversy over Palantir’s overvaluation, with its price-to-earnings ratio (PER) reaching 600 times. Nevertheless, why does it continue to rise?
“This is because Palantir’s ontology technology is proprietary. Most investors believe that other companies will not be able to keep up with Palantir’s technology for the time being, and that their monopoly will be strengthened like Nvidia’s.”
The AI bubble is now in its infancy stage
AI bubble controversies also arise periodically.
“I think it is true that the AI bubble has entered the beginning. Although it is overheated, it is not yet a market that cannot be explained by valuation. We must be cautious, but the risk is greater not to ride this bubble. For example, during the ‘Three Lows Boom’, it was called a real estate bubble, but the asset gap between those who took the opportunity and those who did not widened significantly. Depending on how the AI bubble is utilized, “I think the asset gap will be very large in 10 to 20 years.”
Will M7 (Nvidia, Apple, Microsoft, Metaplatforms, Amazon.com, Alphabet, Tesla) continue to grow?
“It is true that M7’s proportion of the S&P 500 has increased to an all-time high. The current AI bubble is sometimes compared to the past dot-com bubble, but companies’ cash generation abilities are different. Of course, even within M7, NVIDIA, Alphabet, Meta, and Microsoft responded relatively well to the AI revolution. Tesla also has ample opportunities in physical AI. I think there is. However, it may be difficult for Amazon and Apple without unconventional measures.”
Is there a new AI-leading stock?
“I think there is still upside centered on big tech. Companies that are attracting attention, excluding M7, are Broadcom and Oracle. Fintech company Robinhood, neocloud companies Coreweave and Nevius, etc. are also worthy of attention.”
What areas should I pay attention to?
“Now we are in a situation where we need to form an AI cluster. It is necessary to connect chip to chip, server to server, and data center to data center. AI network companies such as Arista Networks, Celestica, and Astera Labs may be of interest. Also, as the number of data centers increases, electricity demand is soaring. NuScale Power, “I think Constellation Energy and others also have potential.”
Is there a way to see the big picture in investing in the AI revolution era?
“During the tech revolution, you can find opportunities by paying attention to the keyword ‘shortage’. When the AI revolution began, the law of scale was important. As a result, NVIDIA graphics processing units (GPUs) were the most lacking. After the supply and demand of semiconductors was resolved, servers were needed. Then, a cluster had to be set up, so a network was needed, and power demand was also high. It started to increase. In this way, market interest shifts. You must study companies in each field to know which company to choose when shortage occurs. The tech revolution lasts longer than you think. In the past, people who sold when apartment prices in Gangnam started to rise had a hard time getting back into it. “We need to continue studying the AI field and look at it from a long-term perspective.”
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