Storage and South Korean stock markets have plummeted. Is the price hike cycle still ongoing?

Yesterday, the South Korean stock market fell nearly 10%, with SK Hynix plunging nearly 12% and Samsung Electronics dropping over 8%. There were many post-analysis reasons for the sharp decline, including profit-taking by leveraged funds, the South Korean government's plan to tax floating profits, interest rate hike expectations, and so on.

If we only look at the decline, it's easy to worry about whether the AI bubble has burst. However, the fundamentals are more important at this time. I will provide an interpretation based on the charts from Bernstein's latest research report:

First, memory prices are still rising. The report predicts that DRAM prices will continue to rise after Q2 2026, albeit at a slower pace, and peak in 2027.

Second, the profitability gap is narrowing. Currently, traditional DRAM wafer revenue is significantly higher than HBM. However, with HBM price increases next year, the revenue and gross margin gap between the two will narrow. Traditional DRAM gross margin is expected to exceed 90%, while HBM will also return to a high level of around 88%.

Third, the profit cycle is predicted to peak in the second half of 2027 after exponential growth, then gradually decline in 2028 as prices normalize. The EPS forecast charts for Samsung, SK Hynix, and Micron all show the same shape: a steep rise followed by a slow decline.

Fourth, the competitive landscape may change. The report believes that with HBM4 performance and capacity expansion, Samsung is expected to regain HBM market share, but there is also uncertainty—Samsung might allocate more capacity to more stable traditional DRAM.

Overall, the fundamentals (volume-price, gross margin, profit cycle) still point to an AI-driven memory upcycle, which is widely considered not yet over. However, stock prices have risen too much within a year with excessive leverage and high expectations. Any catalyst (earnings season approaching, tax rumors, regulatory tightening on leveraged ETFs, rate hike expectations, etc.) could trigger a sharp correction.

In the short term, we need to watch Micron's earnings data and guidance, which will directly verify whether the demand momentum in the AI hardware sector remains.

(Not for investment purposes)

$Micron Tech(MU.US) $Samsung Electronics (SSNGY.US)  $Huatai-PB SSE KSE China Korea Semiconductor ETF(QDII)(513310.SH) $XL2CSOPHYNIX(07709.HK)