Global investment banks Goldman Sachs and Morgan Stanley issued sharply contrasting assessments of Korean semiconductor stocks on the same day.
Goldman said shares of Samsung Electronics and SK hynix, which plunged after the U.S. midterm elections, were in oversold territory and approaching historical lows.
Morgan Stanley, meanwhile, cut its target price for SK hynix by 38 percent, warning that increased memory supply in 2028 could erode profitability. Both banks viewed near-term industry conditions as solid, but differed in their outlook for 2028.
According to financial investment industry sources on Tuesday, Goldman Sachs stated in a report on Monday (local time) that semiconductor stocks had entered an oversold zone.
This assessment followed the sharp drop in stock prices driven by concerns that regulations on AI (artificial intelligence) data center construction could be tightened after the U.S. midterm elections. The Philadelphia Semiconductor Index fell 13 percent over the past week and 31 percent since the 1st.
The basis for Goldman Sachs' optimism lies in expanded AI investment and valuation. Goldman Sachs projected that "AI infrastructure investment will increase from approximately $1.3 trillion (1,751 trillion won) next year to about $2 trillion (2,694 trillion won) by 2028."
Stock price levels have also approached historic lows. According to estimates from the securities industry, the 12th-month forward PBR (price-to-book ratio) for Samsung Electronics and SK hynix is 1.21 times and 1.23 times, respectively.
The all-time low PBRs for the two companies were 0.83 times and 0.8 times, respectively. Goldman Sachs noted that "while catalysts for stock price increases may be lacking until year-end, selective investment appeal has increased."
David Solomon, CEO of Goldman Sachs, also emphasized in a CNBC interview on the same day that while acknowledging the possibility of market adjustments due to changes in the political environment, he stated, "I still firmly believe in the long-term outlook that AI will contribute to improving the productivity of our economy."
In contrast, Morgan Stanley significantly lowered its target prices for major Korean semiconductor stocks on the same day. Morgan Stanley analyst Sean Kim cut Samsung Electronics' target price by 19 percent from 381,000 won to 309,000 won, and SK hynix's target price by 38 percent from 2.6 million won to 1.6 million won. The firm maintained its overweight recommendation for both companies but lowered its long-term profitability assumptions.
Morgan Stanley viewed 2028 as a turning point for the industry cycle. This is precisely the year Goldman Sachs expects AI investment growth to continue.
Analyst Kim and colleagues said, "Short-term memory fundamentals appear solid, but increased supply in 2028 due to the operation of new production capacity is the issue. If memory supply increases from late 2027, it may become difficult to maintain high profitability, so we lowered our long-term profit margin assumptions and the valuation multiples applied to target prices."
Analyst Kim previously drew market attention by warning of a semiconductor industry downturn in his August 2021 report titled "Memory, Winter is Coming."
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