Key Moments
- Major memory chipmakers have fallen 20-30% in the past two weeks, driven by geopolitical and technology-related concerns.
- KB Securities’ Jeff Kim expects AI data center capital spending and 2Q26 chip orders to continue rising, supporting earnings strength into 2026.
- Forward P/E valuations for Samsung, SK Hynix, and Micron have compressed to a 3-5x range, which Kim argues implies limited downside.
Sector Pullback Driven by Sentiment, Not Fundamentals
Memory chip stocks have slumped between 20% and 30% over the past two weeks, but one analyst believes the move is being driven more by investor anxiety than any deterioration in industry conditions. The analyst expects the “correction to be short and rally to be long.”
Shares of Micron, SK Hynix, and Samsung Electronics have dropped 30%, 24%, and 20%, respectively, under pressure from Middle East geopolitical risk and unease about Google’s TurboQuant, an AI efficiency technology that some investors feared could weigh on chip demand.
However, Jeff Kim, head of research at KB Securities, sees a disconnect between the selloff and the sector’s underlying trajectory. “Despite geopolitical uncertainties and concerns over interest rate volatility, AI data center capex is continuing to rise in 2026 and chip orders in 2Q26 are exceeding expectations,” he said.
“That said, we believe the recent pullback was caused by profit-taking driven by overblown concerns, not by weakened fundamentals,” he added.
Robust 2026 Earnings Outlook for Samsung and SK Hynix
Kim’s projections for the earnings outlook remain notably strong. He estimates that Samsung Electronics and SK Hynix will generate a combined 2026 operating profit of 397 trillion Korean won, representing a 337% year-on-year increase.
Within that total, Samsung is expected to deliver 220 trillion won in operating profit, supported by DRAM margins of 74% and NAND margins of 58%. SK Hynix is forecast to produce operating profit of 177 trillion won, with DRAM margins at 78% and NAND margins at 56%.
| Company | Projected 2026 Operating Profit (KRW trillion) | DRAM Margin | NAND Margin |
|---|---|---|---|
| Samsung Electronics | 220 | 74% | 58% |
| SK Hynix | 177 | 78% | 56% |
| Total (Samsung + SK Hynix) | 397 | – | – |
Valuations Compressed Toward Historical Troughs
The recent decline in share prices has pushed valuation multiples sharply lower. Twelve-month forward price-to-earnings ratios for the three leading memory names now sit in the 3-5x band – 5.3x for Samsung, 3.7x for SK Hynix, and 3.7x for Micron.
“Valuations are near historical lows, which suggests limited downside,” Kim wrote, indicating that the current levels could offer an attractive entry point if his thesis on fundamentals proves correct.
| Company | 12-Month Forward P/E |
|---|---|
| Samsung Electronics | 5.3x |
| SK Hynix | 3.7x |
| Micron | 3.7x |
TurboQuant Viewed as Structural Tailwind, Not Threat
Addressing fears around Google’s TurboQuant, Kim took a contrarian stance versus the broader market mood. He argued that tools that enhance AI efficiency could ultimately expand, rather than contract, demand for memory.
In his view, technologies that boost AI efficiency “should lower entry barriers while driving longer-term computing demand, chip content, and ultimately, AI demand.”
AI Cycle Still Seen in Its Early Stages
Kim drew comparisons with prior technology inflection points, noting that the spread of personal computers in 1995 and the iPhone’s introduction in 2007 each ushered in more than a decade of structural growth. He characterized the AI upcycle, which he said began to take shape in 2023, as still being at an early phase.
“Given the industry direction with memory chips positioned as a strategic asset for AI infrastructure, we believe the current correction will be short,” he concluded.
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