Chip stocks wobble, but analysts raise targets for Samsung, SK hynix

Brokerages stay bullish on AI-driven memory demand despite Middle East conflict

Samsung Electronics and SK hynix logos are seen at the companies’ offices in Seoul and Icheon, Gyeonggi Province. (Newsis)

Even as geopolitical tensions in the Middle East weigh on equity markets worldwide, brokerages at home and abroad are raising their price targets for South Korea’s two largest chipmakers, Samsung Electronics and SK hynix, betting that booming demand for artificial intelligence memory chips will drive strong earnings growth.

With investor sentiment shaken by US-Israeli strikes on Iran, heavy foreign selling has dragged down shares of both chipmakers.

As of Monday’s close, shares of Samsung Electronics had fallen 12.84 percent to 188,700 won ($125) this month, underperforming the benchmark Kospi’s 11.2 percent drop over the same period. SK hynix declined 8.2 percent to 974,000 won.

Though both shares rebounded modestly on the day, rising between 2 percent and 7 percent, the recovery has yet to gather momentum.

Despite the recent volatility, the broader market outlook for the semiconductor sector remains upbeat, largely driven by robust demand for chips used in AI applications.

According to Investing.com, Goldman Sachs recently raised its target price for Samsung Electronics to 260,000 won from 205,000 won, an increase of about 27 percent, while maintaining its “buy” rating.

Goldman Sachs also lifted its operating profit forecast for Samsung Electronics this year to 23.9 trillion won from 18.1 trillion won, citing rising prices for commodity DRAM and NAND memory. It projected that the chipmaker’s return on equity could reach around 37 percent, approaching a record high.

The bank also raised its target price for SK hynix to 1.35 million won from 1.2 million won, an increase of 12.5 percent. Its operating profit forecast for the company was revised up to 20.2 trillion won from 16.9 trillion won.

Local brokerages have followed suit, raising their target prices for the two chip giants. On average, the brokerages now set target prices of around 250,000 won for Samsung Electronics and roughly 1.33 million won for SK hynix, up about 6 percent and 3 percent, respectively, from a month earlier.

KB Securities offered one of the most bullish outlooks. The brokerage recently raised its target price for Samsung Electronics by 33 percent to 320,000 won, while lifting its target for SK hynix by 21 percent to 1.7 million won.

“Samsung Electronics, having entered a full-fledged earnings cycle, appears to be in the early phase of a valuation re-rating as its earnings growth gathers pace,” said Kim Dong-won, head of research at KB Securities, highlighting limited supply growth for DRAM and NAND flash despite rising demand.

Ryu Hyung-keun, an analyst at Daishin Securities, said SK hynix shares appear undervalued at current levels and have several catalysts for a rebound.

He added that the stock could receive further momentum when Micron Technology, the world's third-largest memory manufacturer behind Samsung Electronics and SK hynix, releases its earnings report later this week.

“Despite stronger business competitiveness, SK hynix is trading at a cheaper valuation than Micron,” Ryu said, noting that the upcoming earnings report could heighten investor interest in the Korean chipmaker.