[Edaily Reporter Kim Kyung-eun ] An analysis suggests that as the memory sector has relinquished its status as a leading AI stock and entered a “beta” phase in which it is following the trend of AI investments, it has become difficult to expect the same level of excess returns as in the past.

Hwang San-hae, an analyst at LS SECURITIES, stated in a report on the 29th, “The AI investment cycle, in a broad sense, is still intact,” but added, “The memory sector is in the process of stepping down from its role as a leading AI stock.”

He assessed that the phase in which the benefits of AI investment were concentrated on memory is effectively coming to an end. He explained that while memory companies had previously been recognized for their high profitability and valuations—driven by supply shortages resulting from expanded AI investment and the massive investment capacity of Big Tech—both of these pillars are now showing signs of instability.

Analyst Hwang noted, “Big Tech companies have shifted from competing in AI to a strategy of spending capital expenditures (CAPEX) at a level they can afford,” adding, “Even during earnings season, they are evaluating CAPEX based on the criterion of return on investment (ROI).”

In particular, the issue of China’s expanding production capacity is seen as a decisive catalyst for this shift. This is due to growing concerns that the IPO of China’s Changxin Memory (CXMT) and the production of DUV (deep ultraviolet) lithography equipment could shorten the period during which the memory market maintains a supply advantage.

Consequently, he predicted that it would be difficult for the semiconductor sector to return to its status as the leading sector generating “alpha” (excess returns) from AI investments. However, given that the AI investment cycle is continuing, he assessed that the semiconductor sector—as a “beta” sector that moves in tandem with the market—has ample potential for a rebound following an oversold condition.

Analyst Hwang predicted that, in the short term, the shareholder return policies of SamsungElectronics(005930)and SK hynix(000660), AI investments and CAPEX plans by Big Tech companies, and the results of the July Federal Open Market Committee (FOMC) meeting would be key factors supporting the downside.

He also suggested a strategy of including defensive sectors alongside semiconductors rather than reducing exposure to the latter. In the U.S., he identified energy, utilities, real estate, and the DEVICE and software (SW) sectors—which are expected to benefit from the resolution of semiconductor bottlenecks—as relatively promising defensive sectors. In South Korea, he highlighted banking, cosmetics, construction, transportation, consumer staples, media, education, and biotech as relatively promising defensive sectors.