Naver market cap plunges due to AI stumbles, interest rate hike

Naver Corp.’s Chief Executive Officer Choi Soo-yeon is making a presentation on the HyperCLOVA X at the Team NAVER Conference Dan 2023 held in Seoul on Aug. 24. [Courtesy of Naver]

Naver Corp., South Korea‘s leading information and technology company, lost nearly 4 trillion won ($3 billion) in market capitalization over the past month as interest rates rise and the company’s generative AI disappoints in its performance.

According to the Korea Exchange on Wednesday, Naver’s market cap stood at 34.7 trillion won as of Tuesday, representing a loss of about 3.7 trillion won from the record high of 38.4 trillion won on August 7.

The IT giant saw its market cap rise to the 38 trillion won range in August from 29.4 trillion won at the beginning of 2023 until the trend’s recent reversal. The company‘s stock price also fell by 9.5 percent during the same period.

Analysts believe that the significant loss in Naver’s market cap in just one month is due to the global trend of interest rate hikes and concerns about the performance of the company’s generative AI, HyperCLOVA X.

Naver unveiled HyperCLOVA X in late August, but the service experienced temporary disruptions, such as delayed responses and errors, on the day of its unveiling when accessed simultaneously by a large number of users. Naver‘s stock price initially rose by 6.2 percent on the day the company unveiled HyperCLOVA X but dropped by 7.8 percent the following day, erasing all the gains within the space of 24 hours.

“The global interest rate hikes last month had a negative impact on tech companies such as Naver. Additionally, concerns were raised about HyperCLOVA X’s performance due to access issues when it was unveiled, which contributed to the stock price decline,” IBK Securities Co. analyst Lee Seung-hoon said.

Naver’s daily trading volume also witnessed a sharp drop to 82 billion won as of Tuesday from 721 billion won on August 7, plummeting to almost 1/9th of the volume compared to a month ago, due to a decline as investors turned away from the IT stock.

Experts predict that Naver’s stock price will likely continue to be lackluster for now.

“Naver has not presented any monetization models for its latest AI achievement, which appears insufficient to drive up the stock price,” according to Daishin Securities Co. analyst Lee Ji-eun. Lee also projected a stagnant market performance for the company until the third-quarter earnings announcement due to a likely fall in ad revenue for the third quarter.

But IBK Securities analyst Lee suggested a potential recovery in the chip industry and consequent recovery in the domestic economy by the end of the third quarter and the fourth quarter could be a likely turning point for the company.