[Edaily Reporter Kim Kyung-eun ] Analysts have concluded that the trend of improving earnings remains intact despite the recent sharp decline in semiconductor stocks. The assessment is that while there is a lack of short-term momentum to drive a stock price rebound, the semiconductor industry itself has not deteriorated. Experts advise that while waiting for a rebound in large-cap semiconductor stocks, investors should focus on small- and mid-cap stocks in the semiconductor materials, parts, and equipment (MPE) sector, which offer strong earnings growth potential.

Lee Jong-wook, an analyst at SamsungSecurities, stated in a report on the 14th, “The lack of momentum for a rebound in the semiconductor memory sector and the emergence of new artificial intelligence (AI) investment alternatives are the root causes of the stock price slump,” adding, “However, this is being overinterpreted as a concern over damage to fundamentals.”

The recent correction in semiconductor stocks is the result of a combination of factors, including interest rate pressures, concerns about the sustainability of AI investments, and the diversification of AI investment targets. The explanation is that China’s Changxin Memory Technology (CXMT)’s plans to launch new products and remarks by Broadcom’s CEO merely served to bring these concerns back into focus.

In particular, the analyst highlighted that the focus of AI investment is expanding from memory semiconductors to cloud computing, software, and other infrastructure sectors. While investor interest is becoming more diversified as the potential for monetization in the cloud business increases, this does not necessarily imply a decline in memory demand or a deterioration in supply and demand conditions.

The analyst stated, “We must distinguish between the slowdown in price growth and the onset of profit declines,” adding, “We expect the period between these two events to be significantly extended in this cycle.” He continued, “The current stock price correction is overreacting to the deterioration in profit forecasts,” and assessed that “this is making memory stock prices attractive again.”

In the past, when the upward trend in memory semiconductor prices slowed, it often led to price declines and deteriorating earnings. However, analysts suggest that this time, even if the rate of memory price increases slows, rising shipment volumes and an expanding share of high-value-added products could support profit growth.

In particular, the report noted that while the expansion of High-Bandwidth Memory (HBM) production is eroding general-purpose memory production capacity, the pace of ramping up new production facilities is not as fast as in the past, making it difficult for supply to increase sharply. Consequently, it is highly likely that memory companies will maintain a robust profit trend through next year.

Regarding CXMT’s technological catch-up—which has recently emerged as a source of market uncertainty—the report assessed that the short-term threat is limited. It explained that the competitiveness of the 4F²-based server DRAM that CXMT plans to launch by the end of the year can only be evaluated after confirming actual mass production yields, customer certifications, and shipment volumes.

The analyst emphasized, “While CXMT’s technological catch-up is a competitive variable in the medium to long term, I see no particular reason to further reflect the persistent risk posed by CXMT in stock prices at this time.”

The analyst pointed out that the lack of a clear catalyst to drive a short-term rebound in large-cap semiconductor stocks is a concern. He advised that while waiting for a rebound in large-cap stocks, small- and mid-cap stocks in the semiconductor materials, parts, and equipment sectors could serve as investment alternatives. In particular, the analysis suggests that investors should select companies with high visibility for earnings growth in 2027–2028.

In the semiconductor equipment sector, where the trend of expanding capital expenditures (CAPEX) is expected to continue through 2028, the analyst highlighted HPSP Co., Ltd.(403870)and PSK INC.(319660)—which have a diversified customer base—as preferred stocks. In the back-end process sector, the analyst singled out DI(003160), TSE CO.,Ltd(131290), and SEMCNS Co., Ltd.(252990)as stocks to watch, noting their high growth potential within SamsungElectronics’ DRAM supply chain.

The analyst explained, “Investors are feeling restless because they cannot identify a trigger for a short-term rebound,” adding, “Factors that could lead to a strong rebound in the future include increased demand for server DRAM for virtual machines (VMs) in the Agent AI environment; stable profits for memory companies even after mobile memory prices stagnate or decline; excess demand and high prices for HBM; and the sector’s relatively attractive valuations within the semiconductor industry.” He added, “Small- and mid-cap companies are excellent investment alternatives while waiting for large-cap stocks to rebound,” noting that “visibility into earnings growth for 2027–2028 is the most important selection criterion.”