Chip Stocks Slump Despite Record Earnings

Samsung Electronics and SK Hynix closed lower despite posting record earnings for days in a row. Samsung Electronics shares fell more than 2% on the day. The disconnect between earnings and share prices is attributed to the burden of rising interest rates and pessimism that AI-driven investment demand could soon cool.

Beneath the weak share prices also lies dissatisfaction over how shareholders are being rewarded. Samsung Electronics announced it would spend 110 trillion won of this year's profits on shareholder returns, but aside from 30 trillion won in cash dividends, it has yet to determine the method and scale, deferring the decision to January. Lee Jong-eun, a senior researcher at the Capital Market Research Institute, pointed out that the deferral itself acts as an uncertainty weighing on the stock.

Investors favor share buybacks over dividends, but Samsung Group's distinctive governance structure makes such a decision difficult, analysts say. Financial affiliates such as Samsung Life Insurance hold Samsung Electronics shares at the 10% cap set by relevant law. Cancellation of treasury shares would reduce the number of shares outstanding and push their stakes above the legal limit, making the decision hard to make.

SK Hynix also faces its own burdens. Its review of a U.S. listing for Solidigm, its NAND flash subsidiary, has sparked controversy over a "spin-off listing." Son In-jun, a researcher at Eugene Investment & Securities, explained that beyond the dual-listing issue, the move would dilute the value of SK Hynix's stake in Solidigm.

Other burdens on chip stocks include the costs of massive capital expenditures, U.S. government demands for local production, and performance bonuses tied to operating profit.