Samsung and SK Hynix shares fall in South Korea after DeepSeek statement
In South Korea, shares of memory makers Samsung Electronics and SK Hynix fell by 3.5% and 2.2%, respectively, after DeepSeek said it had reduced the amount of high-bandwidth memory needed for its artificial intelligence models. As Taipei Times reports, the decline partly offset the recent recovery in the two companies’ share prices following a sharp sell-off in July.
DeepSeek’s statement heightened investor concerns about the near-term outlook for semiconductor demand. Sentiment in the technology sector is also being affected by concerns over a possible increase in interest rates in the United States.
Chip demand estimates
Ha Seok-keun, chief investment officer at Eugene Asset Management, said that DeepSeek’s new model could intensify concerns about slowing semiconductor demand in the short term. At the same time, he believes that models from companies such as Meta Platforms and OpenAI will have a greater impact on the industry’s fundamentals, as they will drive actual AI use and demand for semiconductors.
Sentiment toward Samsung and SK Hynix had previously improved due to signs of continued spending by major technology companies, low share valuations, high earnings and substantial shareholder payouts. However, the latest decline showed that the recovery in share prices will not necessarily be even.
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Volatility restrains investors
Local retail investors contributed to the rapid rise in the shares of the two manufacturers at the beginning of the year, but later sharply reversed their positions amid growing skepticism about AI. They are quickly exiting leveraged exchange-traded funds tied to these companies and sold approximately $10 billion worth of Samsung and SK Hynix shares over the course of a month.
At the same time, some foreign funds have begun returning to the market, although they had been major sellers since the start of the year. Isaac Tong, senior investment director and manager of the Aberdeen Asian Income Fund, considers South Korean memory manufacturers more attractive than other semiconductor-sector companies because of their valuations compared with global competitors.
Samsung trades at a price-to-current-book-value ratio of 2.7, while SK Hynix trades at 5, compared with 11 for the Philadelphia Semiconductor Index. Both companies also trade at about four times forecast earnings, versus 19 times for the global chipmakers index. Their shares remain more than 25% below their all-time highs, while daily swings of 5% or more are still common.
