Despite a significant drop in memory semiconductor stock prices from their peaks, the KOSPI market has already confirmed its bottom. The demand for memory, driven by the proliferation of artificial intelligence (AI) agents and the need for 24/7 operational personal virtual machines (VMs) and context data storage, is just beginning to explode.
Park Jin-ho, Chief Investment Officer of NH-Amundi Asset Management, made these remarks on October 19 during a press conference in Yeouido, Seoul, marking the first anniversary of the NH-Amundi Growth-Driven Korea Fund. He addressed concerns regarding the recent AI bubble theory and the weak performance of semiconductor stocks.
The Growth-Driven Korea Fund, managed by NH-Amundi, is an active equity fund that invests in companies leading the AI transformation (AX), capital market transformation (CX), and green transformation (GX). It was established on October 14 of last year.
“AI Bubble Theory Fuels Fear... B2C Agentic Commerce Will Change the Game”
Park attributed the recent weakness in domestic memory semiconductor stocks, such as Samsung Electronics and SK Hynix, to profit-taking following significant gains over the past two years and concerns over intensified competition. He noted that unlike the monopolistic structures of GPUs and foundries, the memory sector has multiple players, which adds pressure. However, he emphasized the evolution of the AI market from simple chatbots to user-specific one-to-one VM agents.
He stated, “As AI agents like Meta's 'Muse' become operational 24/7, devices will require at least 34-40GB of DRAM and large-capacity cold data (SSD) to store individual histories and contexts. Contrary to concerns about excessive capital expenditures (CAPEX) from big tech, productivity innovations among white-collar workers and new monetization models through B2C agentic commerce are beginning to flourish.”
Park also strongly suggested the potential for a re-rating of Korean stocks. He predicted that even if profit estimates for Samsung Electronics and SK Hynix remain somewhat stagnant, their shareholder return policies will provide strong support. He estimated that the combined shareholder return for both companies in 2027 could reach approximately 300 trillion won. He cited Apple's past experience of implementing strong share buybacks and dividends during periods of stagnant profit growth, which led to a re-rating of its stock price. He noted that holding Samsung Electronics for three years could yield a stable return of around 30% solely from dividends and shareholder returns.
One-Year Return of 84.86%... “Second Surge Led by 'Materials, Parts, and Packaging'”
As of October 14, marking its one-year anniversary, the Growth-Driven Korea Fund achieved a return of 84.86%, outperforming the KOSPI index return of 67.63% by 17.23 percentage points, with net assets surpassing 1.3 trillion won. Year-to-date, the fund's return stands at 55.02%, exceeding the KOSPI by 12.44 percentage points, with about 80% of the excess performance coming from the semiconductor and IT hardware sectors.
Choi Chi-hyun, Deputy Manager of the Equity Investment Division, pointed out that while the core portfolio strategy centered on the AI industry remains valid in a high-interest environment, a shift in stock-picking strategy is necessary for the second half of the year.
He explained, “The past year has seen a concentration in large-cap stocks like Samsung Electronics and SK Hynix. However, as the profit growth trajectory of these two memory giants slows, we are entering a phase of reduced beta (sensitivity). With significant investments expected in semiconductor front-end equipment next year, we plan to transition some of the large-cap stock allocation to sectors benefiting from materials, parts, and packaging (ABF) to generate additional alpha returns.”
Choi also proposed a risk management strategy to address macro volatility. To hedge against ongoing risks from high interest rates and inflation, he suggested increasing allocations to the financial (banking and insurance) and energy (refining and gas) sectors to control portfolio volatility.
He highlighted the insurance sector as a favorable option within financial stocks, particularly with the potential for resuming shareholder returns following regulatory changes regarding reserve funds. He also recommended increasing exposure to the secondary battery sector, which is expected to see a turnaround in performance visibility by 2027, supported by growth in the U.S. energy storage system (ESS) market and European policy momentum.
“Differentiation from Winning Korea... Recommend 60% Korean Stocks, 40% U.S. Stocks”
During the Q&A session, discussions focused on the differences between the flagship 'Winning Korea Fund' and the asset allocation strategy amid rising concerns about capital outflows from the domestic market.
Choi noted that while the Winning Korea Fund specializes in companies with technological innovations in materials and parts (AX), the Growth-Driven Korea Fund tracks the shifting focus of Korea's growth, incorporating not only AX but also CX (capital markets) and GX (green transformation) based on research. He emphasized that both funds execute strong active bets on assured stocks without a separate benchmark.
In light of growing concerns about capital outflows from the domestic market, Park suggested, “While we acknowledge the structural stability of the U.S. market, the recent short-term decline in the Korean market has been excessive, providing sufficient valuation appeal. At this point, we recommend a 60% allocation to Korean stocks and 40% to U.S. stocks, considering the potential for a rebound.”
Addressing concerns about the impact of the recent expansion of the exchange-traded fund (ETF) market on public funds, Park stated, “We are preparing to launch new mixed products like 'Growth-Driven Korea 50.' While the rise of ETFs as a popular investment vehicle is positive, the role of actively managed public funds that can flexibly respond to market changes remains crucial. We will enhance our mixed lineup to precisely adjust the proportion of risky assets according to investor needs and actively select stocks to generate excess returns.”
* This article has been translated by AI.
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