AI Semiconductor Boom Lifts Nomura's Price Targets for Samsung and SK Hynix

The rapid growth of the artificial intelligence (AI) industry is transforming the semiconductor market landscape. Memory semiconductor companies, whose earnings and stock prices previously showed high volatility with economic cycles, are now gaining recognition for their stable growth potential.

Global investment bank Nomura Securities has significantly raised the target prices for Samsung Electronics and SK Hynix. In a recent report, Nomura Securities revised Samsung Electronics' target price to 590,000 won and SK Hynix's to 4 million won, respectively. The key background for this upward revision was a 're-evaluation of valuation.' In the past, memory semiconductor companies were valued at a Price-to-Book Ratio (PBR) of 1-2 times due to earnings uncertainty from industry cycle volatility. However, with the expansion of the AI industry and memory semiconductors playing a crucial infrastructure role, an analysis emerged suggesting they should be valued with a premium akin to global foundry giant TSMC. Nomura applied a PBR of 5 times for Samsung Electronics and 6 times for SK Hynix.

The explosive increase in memory demand driven by AI market expansion, coupled with limited supply growth, suggests a potential for prolonged supply shortages. This supply-demand imbalance is expected to lead to improved profitability for Samsung Electronics and SK Hynix. Companies that secure competitiveness in AI server-grade HBM (High Bandwidth Memory) and high-performance DRAM markets are particularly projected to benefit.

Amid assessments that the profitability of semiconductor companies could improve to an unprecedented level compared to the past, substantial capital is also flowing into the semiconductor Exchange Traded Fund (ETF) market, further fueling investment enthusiasm. Investor capital is rapidly shifting towards the semiconductor market. In the second week of May alone, approximately 1.8 trillion won in new capital flowed into the domestic semiconductor ETF market. Eight asset management firms have launched 16 new semiconductor ETFs, engaging in a race to secure market share.