[Edaily Reporter kyoungeun kim ] While the U.S. stock market is hitting new record highs without the help of major artificial intelligence (AI) stocks, analysis suggests that the valuation discount for SK hynix(000660)is widening again. The assessment is that this is due to factors specific to Korea—such as the outflow of foreign capital and rumors of a subsidiary’s IPO—rather than a disruption in the memory cycle.

Kim Jun-young, an analyst at iM Securities, stated in a report on the 12th, “Micron’s price-to-earnings ratio (P/E ratio) premium over SK hynix stands at 1.60x; after narrowing to 1.40x in mid-September, the gap has widened again just one month later.” While SK hynix’s 12-month forward P/E ratio fell 17% from 4.46x to 3.70x on the 23rd of last month, Micron’s remained in the range of 5.9x to 6.9x.

Analyst Kim explained, “It’s hard to view this as a disruption in the memory cycle,” adding, “If the cycle were the cause, Micron—which has a large share of general-purpose memory—should have been downgraded first.”

Analyst Kim cited two reasons for the widening discount. First, on the 28th of last month—the first trading day after the Chuseok holiday—foreign investors net sold 3.24 trillion won worth of KOSPI stocks, and shares of SamsungElectronics(005930)and SK hynix each fell by more than 5%. Since then, foreign capital inflows have yet to return.

The factor that Researcher Kim viewed as more significant was that rumors of Solidym’s U.S. IPO fueled concerns about a holding company-type discount. Analyst Kim explained, “If Solidym does not go public, the company’s ability to raise funds will be reduced, which could lead to a decrease in shareholder returns.” He added, “Faced with a dilemma where it is difficult to resolve structural discount factors, the company likely opted for a subsidiary IPO, which has a less direct impact on the sentiment of domestic shareholders.”

The 40 trillion won share buyback and cancellation program will continue through the middle of this month. However, Analyst Kim noted, “While share cancellations support the stock price, they do not change the valuation multiple; rather, they mechanically lower the forward P/E ratio by increasing earnings per share (EPS).” He added, “To reduce the profit discount associated with the cycle peak, the sustainability of earnings must be confirmed beyond 2028.” He pointed out, “The inflection point at which we can expect the premium to narrow will be the additional shareholder return measures announced alongside the third-quarter earnings report in late October.”

The U.S. stock market is showing signs of a shift away from AI-driven concentration. While the S&P 500 index continues its rally to record highs, the Philadelphia Semiconductor Index fell 4.3% last week, while utilities (4.0%), software (3.9%), consumer staples (3.6%), and healthcare (2.8%) rose. With September employment growth limited to 29,000 jobs, the probability of an interest rate hike at the October Federal Open Market Committee (FOMC) meeting fell from the high 60s at the end of September to 18–25 percent; however, defensive stocks, energy, and financials rose in place of growth stocks.

Analyst Kim noted that interest rates are not the only factor weighing on the valuations of large-cap AI stocks. The 12-month forward P/E ratio for the Magnificent 7 (M7) stands at 24.6x, which is 8 points lower than the peak reached in late October of last year (32.6x) and falls below the long-term average (29.3x) by one standard deviation (24.8x). During the same period, the Dow Jones Industrial Average maintained a P/E ratio of 20–22x.

Analyst Kim pointed out, “The problem is that revenue, investment, and funding are circulating among just a few companies,” adding, “This structure resembles the situation in the Korean stock market, where companies are discounted due to dual listings.” Microsoft recognized $24.1 billion in revenue from OpenAI, while 47% of Anthropic’s revenue last year came through Amazon and Google Cloud. Of Amazon’s $80.9 billion in second-quarter pre-tax profit, approximately two-thirds came from valuation gains on its stake in Anthropic. Analyst Kim remarked, “While the U.S. AI ecosystem does not involve dual listings, investments, revenue, and valuation gains are effectively counting the same money multiple times,” adding, “It is only natural that the market is not applying the same multiples to these gains as it did in the past.”

He identified Anthropic’s IPO, rumored to take place around mid-November, as the next test. Analyst Kim explained, “Once it goes public, the market will reassess the value of AI labs on a daily basis, and the valuation gains of Amazon and Google will also fluctuate with daily stock prices.” He added, “The valuation gains that have driven profits so far could conversely erode profits, and the liquidity absorption from such a massive IPO will also be a burden.”