[E-Daily Reporter Kim Kyung-eun ] Forecasts suggest that domestic semiconductor stocks, which recently plummeted amid concerns over the profitability of artificial intelligence (AI) investments, are set to enter a rebound phase. This outlook stems from the fact that while the semiconductor industry remains in a strong upward cycle, stock prices have fallen to historically undervalued levels relative to earnings. Analysts believe that as the gap between earnings and stock prices narrows starting this month, a “W-shaped rebound” could materialize.

Lee Chang-min, an analyst at KB Securities, stated this in a report on the 2nd, noting, “We are currently at the second bottom of a W-shaped rebound.” He added, “We believe stock prices have passed the peak of investor concerns, so it is time to focus on upside potential rather than downside risk,” and predicted, “In particular, a W-shaped rebound will begin in November and December as the gap between earnings and valuations narrows.”

KB Securities forecasts that the memory market will enter an accelerated phase of a strong upward cycle in 2027, characterized by simultaneous price increases and rising shipment volumes. The firm anticipates that while the expansion of High-Bandwidth Memory (HBM) production will constrain the supply of standard DRAM, growth in the AI inference market will further boost memory demand.

Accordingly, the firm expects general-purpose DRAM prices to rise 40% next year compared to this year, while NAND flash prices are projected to increase by 32%. The estimated price increase for HBM is expected to reach 121%. The analysis suggests that as the memory supply shortage intensifies compared to this year, earnings growth will continue for SamsungElectronics(005930)and SK hynix(000660).

On the other hand, stock prices are failing to keep pace with the rate of profit growth. Based on KB Securities’ estimated 2027 earnings, the price-to-earnings ratio (PER) stands at just 3.0 times for SamsungElectronics and 2.5 times for SK hynix. Analysts note that the gap between semiconductor companies’ earnings and stock prices has widened to a historic low.

Analysts also noted that concerns over overinvestment in the AI industry are being countered by actual demand. While AI investments by global Big Tech companies over the past two to three years were largely preemptive capital expenditures aimed at securing future demand, they have recently entered a monetization phase that is translating into actual revenue and profit growth.

The operating profit margins of the cloud businesses operated by major cloud service providers (CSPs)—such as Google, Amazon, and Microsoft—have reached around 40%. The annual recurring revenue (ARR) of major AI companies, including OpenAI and Anthropic, is also growing rapidly.

The analyst explained, “A common feature observed in recent earnings reports is that it is not a lack of demand but rather supply capacity that is limiting growth,” adding, “Current investment in AI infrastructure is not a phase of overinvestment that outpaces demand, but rather a phase of capacity expansion to keep up with AI demand that is growing faster than expected.”

The commercialization of agentic AI, set to gain momentum starting next year, is also cited as a factor that will expand semiconductor demand. Agentic AI is a technology that plans tasks based on user instructions and performs work by utilizing various tools. Since its computational processes are more complex and involve more repetitive tasks than existing AI chatbots, data throughput and memory usage are expected to increase significantly.

In particular, as demand for AI infrastructure expands from training to inference, demand is expected to rise not only for HBM but also for general-purpose DRAM and NAND flash. Analysts also predict that the importance of central processing units (CPUs), which manage AI tasks and handle data transfer, will increase.

KB Securities maintained its “Positive” investment rating on the semiconductor sector and named SamsungElectronics and SK hynix as its top picks. It kept its target price at 600,000 won for SamsungElectronics and 3.5 million won for SK hynix. The firm estimates that these stocks have upside potential of approximately 167% and 147%, respectively, compared to their closing prices on the 30th of last month.

The firm estimated SamsungElectronics’ 2027 operating profit at 640 trillion won and SK hynix’s at 470 trillion won. In addition to earnings improvements driven by rising prices for standard memory and expanded HBM supply, the firm expects the expansion of long-term supply agreements (LTAs) and strengthened shareholder return policies to lead to a revaluation of corporate value.

The analyst added, “With profit growth virtually assured due to the continued rise in standard memory prices, the normalization of HBM prices, and the increasing share of long-term supply agreements, supply-and-demand conditions are also expected to improve as the direction of shareholder returns becomes clearer.”