Samsung Electronics reported earnings that exceeded market expectations, yet Asian semiconductor stocks plummeted. Despite a significant increase in operating profit driven by demand for artificial intelligence (AI) memory, analysts deemed the results insufficient to meet already heightened investor expectations. This led to a wave of profit-taking in stocks that had surged this year.
According to Bloomberg on July 7, Samsung's quarterly operating profit surged 19-fold year-on-year due to increased demand for AI memory.
However, the results only surpassed market expectations by 6%, causing Samsung's stock to drop as much as 8.7% during trading on the Seoul stock exchange. The downturn extended to other Asian memory and storage-related stocks, including SK Hynix and Japan's Kioxia.
The MSCI Asia Technology Index also fell by as much as 2.9% during trading. In contrast, financial and telecommunications stocks rose, as funds shifted to sectors perceived to have lower stock price pressures and minimal risk of earnings shocks.
Bloomberg analyzed this adjustment as indicative of stricter criteria among investors regarding AI-related stocks. Concerns over production capacity expansion, technological delays, and rising debt, which had previously been overshadowed by expectations of AI growth, are now being viewed as reasons for selling.
Tim Waterer, chief market analyst at KCM Trade, remarked, "This was a typical 'sell on the news' scenario. In a situation where stock prices have already risen significantly, even strong earnings are unlikely to satisfy investors."
Particularly, stocks in the memory and storage sector, which had seen substantial gains this year, experienced significant declines. Kioxia's stock fell nearly 12%. Conversely, indices for Asian healthcare, finance, and consumer goods have risen over the past two weeks, while the technology equipment and hardware index has dropped more than 10%.
However, it may be premature to declare the end of the semiconductor rally. Hebe Chen, senior market analyst at Vantage Global Prime, stated, "If memory prices continue to rise or if the next round of semiconductor earnings is strong, funds could flow back into leading stocks. The long-term growth expectations surrounding AI remain valid."
The key question is whether the memory market will repeat the pattern of sharp declines following past booms or enter a prolonged period of prosperity driven by AI demand. Albert Yong, managing partner at Petra Capital, noted, "Investors are now focusing more on the long-term direction of the memory market rather than short-term earnings."
* This article has been translated by AI.
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