Are Samsung and SK Hynix Stocks Still a Buy? Record Profits Collide With AI Bubble Fears After Chip Rout

SEOUL, South Korea — Samsung Electronics and SK Hynix are on track for the most profitable quarters in their history. Yet investors who bought their shares near this year's highs are deep underwater.

That gap between booming earnings and battered stock prices sits at the center of a question many investors are asking: after a sharp selloff in October, are South Korea's two memory chip giants a bargain, or is the artificial intelligence trade that lifted them starting to unwind?

The answer depends on how long the AI-driven memory boom lasts, and on whether the companies can convince markets that their profits are sustainable. Both companies report full third-quarter results next week, with SK Hynix on Oct. 28 and Samsung on Oct. 29. Those reports could set the tone for the rest of the year.

A brutal October

Korean chip stocks have been among the hardest hit in a global retreat from AI-related shares.

On Oct. 13, Samsung shares fell 7.4% to 232,000 won, and SK Hynix dropped about 10% in a single session. Foreign investors sold about 2.36 trillion won of SK Hynix shares and nearly 1.36 trillion won of Samsung shares that day. The selling briefly pushed South Korea's benchmark Kospi index below 6,000.

The losses continued. The Kospi fell more than 2% on Friday to about 5,415 and was headed for a second straight weekly loss, Reuters reported. Samsung fell 2.8% in early trading Friday, while SK Hynix slipped 0.6%.

SK Hynix has been hit especially hard. The stock closed Thursday at 1.277 million won, according to the Seoul Economic Daily, nearly 60% below its peak. Shares had traded in the 2.5 million won range before tumbling in July after the company's second-quarter results failed to meet sky-high expectations.

About 74% of SK Hynix shareholders were sitting on losses as of Oct. 19, according to NH Investment & Securities. Many are individual investors who bought heavily during the stock's run-up. Retail investors bought a net 31.5 trillion won of the stock from April to June alone.

What's behind the selloff

Several worries have converged.

The broadest is concern about how long technology companies can keep spending at record levels on AI data centers, and how they will pay for it. Shares of Nvidia, AMD and other AI-linked companies have also fallen. The Nasdaq slid more than 1% on Thursday after earnings from Tesla and Meta Platforms "failed to allay AI-related concerns," Reuters reported.

Rising interest rates add pressure. The 10-year U.S. Treasury yield has climbed above 5%, raising borrowing costs for the companies building AI infrastructure. Higher yields also make richly valued growth stocks less attractive. Oil prices above $100 a barrel, driven by the war involving Iran, have added to inflation fears.

There are also concerns specific to the memory business. Reports that China's CXMT, a fast-growing Chinese memory chipmaker, is advancing new DRAM technology raised fears of tougher competition for Samsung, SK Hynix and U.S. rival Micron Technology. CXMT has said it plans to unveil a new server memory chip by year-end, but it has not disclosed key details such as yield, volume or customers.

A stronger South Korean won has also weighed on expectations. A stronger currency reduces the value of overseas sales when converted back into won. The won has gained nearly 9% against the dollar this year.

The bull case: record profits

Despite the stock slump, the companies' underlying businesses remain extraordinarily strong.

Samsung said in preliminary results on Oct. 8 that it expects third-quarter operating profit of 107.4 trillion won, about $80 billion. That would be a record, up about 20% from the previous quarter, on revenue of 195 trillion won.

SK Hynix is expected to report its own record. Analysts surveyed by FnGuide forecast third-quarter operating profit of about 77 trillion won.

The profits reflect soaring demand for memory chips, especially high-bandwidth memory, or HBM. These specialized chips are paired with Nvidia's AI processors and other accelerators to train and run AI models. SK Hynix has been a leading supplier of HBM to Nvidia, and Samsung has been working to catch up.

Supply remains tight, according to Micron, which reports earlier than its Korean rivals and is closely watched as an industry indicator.

"We do not have line of sight to when supply and demand will return to balance," Micron CEO Sanjay Mehrotra said in late September.

Micron Chief Financial Officer Mark Murphy added: "Our inventory levels and supply remain extremely tight."

Supporters argue that the recent selloff has pushed valuations to attractive levels. Meritz Securities estimates SK Hynix's projected price-to-book ratio for next year at about 1.1 times, near historical lows.

Shareholder returns in focus

Both companies have also leaned on buybacks. SK Hynix completed about 40 trillion won in share purchases on Oct. 21, about a month earlier than planned. Samsung's buyback, worth roughly 15 trillion won, ended Oct. 6.

The end of those buyback programs removes a source of steady demand for the shares. Some analysts say that could increase near-term volatility.

But investors are watching for new shareholder-friendly steps. SK Hynix has said it will announce additional shareholder return measures alongside its results. Shares rose 4.4% on Thursday after the company halted a review of a possible stock market listing for Solidigm, its U.S. storage subsidiary. That eased investor concerns about a so-called duplicate listing that could dilute the parent company's value.

"We believe the company has declared that enhancing shareholder value is a higher priority," Kim Sun-woo, an analyst at Meritz Securities, said of the decision.

"We expect more effective and concrete measures to boost shareholder value to be presented at the upcoming earnings call," Kim said.

The bear case: priced for perfection

Skeptics say record profits may already be reflected in share prices, and that the bigger risk is what comes next.

Memory chips have historically been one of the most cyclical parts of the technology industry. Periods of shortages and soaring prices have often been followed by oversupply and price collapses as manufacturers add capacity. Investors are trying to judge whether this cycle will break that pattern because of AI demand, or whether it will end the same way.

Some early signals point to cooling prices. A Samsung Securities-cited report showed South Korea's memory chip export prices fell 10.7% in September from August, although total export value rose. Analysts cautioned that changes in product mix can distort such figures.

SK Hynix's July results offered a warning. The company reported sharply higher profits, but its shares fell because results did not match the market's elevated expectations. The stock has not recovered since. SK Group Chairman Chey Tae-won said at a business forum in July that he believed the share price would rise over the long term as memory chip demand continued.

Higher worker bonuses tied to last year's windfall profits could also eat into earnings, according to Goldman Sachs.

Even Wall Street's most prominent bankers have flagged risks. JPMorgan Chase CEO Jamie Dimon this month cited "elevated asset prices," high inflation and rising rates as concerns, saying, "These forces may be manageable, but we remain prepared for a wide range of outcomes."

What to watch next week

Next week's earnings reports will be closely scrutinized on several fronts:

• HBM demand: Whether orders from Nvidia and other AI chip customers remain strong into 2027.
• Pricing: Any sign that memory prices are peaking.
• Spending plans: How much each company plans to spend on new production capacity, which could hint at future oversupply.
• Shareholder returns: New buybacks or dividends, particularly from SK Hynix.
• Competition: Progress by Samsung in winning HBM orders, and any comments on Chinese rivals.

Investors will also be watching U.S. technology giants' spending plans. Their appetite for AI data centers ultimately drives demand for memory chips.

The bottom line

Samsung and SK Hynix offer a sharp contrast: historic profits on one side, and stocks that have fallen steeply as investors question the durability of the AI boom on the other.

For long-term investors who believe AI spending will stay strong for years, the recent decline may look like an opportunity to buy dominant companies at lower prices. For those worried about a cyclical peak, rising rates or an AI investment slowdown, the volatility may be a reason to wait for clearer signals.

Analysts note that both stocks are likely to stay volatile around next week's results. Swings of 5% to 10% in a single day have become common.

This article is for informational purposes only and is not investment advice. Readers should consider their own financial situation and consult a licensed financial adviser before making investment decisions.