Chip Stocks Tumble, But Analysts See AI Upside
Samsung and SK Hynix stocks took a hit over fears that rising LNG prices could impact South Korea's energy costs. However, analysts are calling it a buying opportunity, arguing that surging AI-driven demand for memory will force hyperscalers to absorb any price hikes, with supply expected to be constrained through 2028.
The recent stock slide for Samsung and SK Hynix saw shares fall by as much as 10-11.5% amid broader market turmoil. This was driven by fears of escalating conflict in the Middle East, which could disrupt the Strait of Hormuz—a critical chokepoint for about 20% of the world's oil. South Korea is particularly vulnerable to energy shocks, importing nearly 98% of its fossil fuels. Liquefied natural gas (LNG) accounts for over a quarter of the country's power generation, making its energy-intensive semiconductor sector sensitive to price volatility. Every 10% increase in international oil prices is estimated to raise South Korea's import prices by 3.15%. The anxiety over energy costs contrasts sharply with the surging demand for high-bandwidth memory (HBM) crucial for AI accelerators. The four largest hyperscalers—Amazon, Google, Meta, and Microsoft—are projected to spend between $650 billion and $700 billion on AI data center infrastructure in 2026 alone. This spending spree is fueling a memory "supercycle." This insatiable demand for AI has led memory manufacturers to divert production capacity from consumer-grade DRAM and NAND flash to more profitable HBM. As a result, supply for traditional memory is expected to remain tight, with some analysts forecasting shortages lasting until at least 2028. SK Hynix and Samsung are dominant players, together controlling a significant share of the global DRAM market. The demand for HBM is so intense that SK Hynix's is reportedly sold out for 2026, and the company is dedicating new advanced manufacturing capacity exclusively to HBM and other high-end solutions. This structural shift in the memory market is reshaping the industry. The HBM market is forecast to grow from approximately $35 billion in 2025 to over $100 billion by 2028. This explosive growth is expected to more than offset concerns about cyclical energy costs for major memory producers.
