Samsung Electronics' headquarters in Seocho, Seoul, and SK hynix's main campus in Icheon, Gyeonggi Province. [Yonhap]
Samsung Electronics' headquarters in Seocho, Seoul, and SK hynix's main campus in Icheon, Gyeonggi Province. [Yonhap]

Domestic semiconductor stocks including Samsung Electronics and SK hynix have fallen into a zone of excessive undervaluation relative to their earnings, and a rebound in November and December is possible, according to a brokerage forecast.

Kim Dong-won, head of research at KB Securities, said in a report Thursday that the Kospi appears to have confirmed a W-shaped bottom, forming two troughs — on July 29 and Oct. 15 — and seems to have passed the peak of concern.

The recent sharp decline in share prices has significantly reduced valuation burdens relative to earnings, KB Securities said. Based on the firm's projected 2027 earnings, the price-to-earnings ratio stands at four times for the Kospi, 3.3 times for Samsung Electronics and 2.7 times for SK hynix. Kim said the domestic stock market has entered an extreme undervaluation phase comparable to past financial crises.

At the same time, Kim said AI demand — the key driver of semiconductor earnings — remains solid. With AI server demand holding up, he expects AI chip demand to outpace supply through 2028.

Kim also said external factors weighing on share prices could gradually ease. "The yield on the 10-year US government bond appears to have passed its short-term peak, and concerns about the financial health of AI data center operators have already been substantially priced in," he said.

The US midterm elections on Nov. 3 represent another near-term variable. Should the Democratic Party gain control of Congress, AI data center regulation and investment oversight could tighten. However, Kim said a significant pullback in AI infrastructure investment overall is unlikely given the broader context of the US-China competition for AI supremacy.

"Market attention is expected to shift from interest rates to inflation, and from supply and demand to earnings," Kim said. "In November and December, a W-shaped rebound should begin as the unusual gap between earnings and valuations narrows."


bbo@heraldcorp.com