A top fund manager focused on the Korean market said that when the market rebounds, Korean AI hardware component stocks with improving profit prospects are very likely to outperform memory chip giants.
Lee Wang-seop, head of equity investment and fund manager at Hana Asset Management, said in an interview this week that as the AI boom cycle continues to spill over, capacitor makers and AI substrate producers will benefit next year. He is also bullish on renewable energy and energy storage suppliers, expecting demand for data center services to persist. Among the major holdings of the 748 billion won (about US$558 million) fund he manages are capacitor maker Samsung Electro-Mechanics and lithium battery developer Samsung SDI.
Lee Wang-seop said, "We have expanded our exposure beyond semiconductors into other areas of the AI value chain," and his Hana Korean IT Fund has returned 77% year to date, beating 99% of peer funds. "We are highly focused on the intersection of sectors and companies whose earnings growth outpaces the Korea Composite Stock Price Index (Kospi) and whose earnings expectations are also being revised upward." Because the Korean stock market is highly dependent on Samsung Electronics and SK Hynix, investors rushed to withdraw from previously increased AI holdings, dragging the benchmark Kospi into a bear market on Thursday.
Lee Wang-seop's strategy highlights that fund managers are reallocating positions beyond these two giants to capture AI-related gains, rather than risking missing a rebound in other parts of the supply chain. The fund manager expects that when the market rebounds, semiconductor materials, components and equipment stocks will outperform large-cap memory chip makers. He added that several sectors, including energy storage suppliers, are expected to post next-year net profit growth that outpaces the Kospi.
"We are only now just entering the stage where prices for ordinary packaging substrates and multilayer ceramic capacitors (MLCC) are also beginning to rise sharply," said Lee Wang-seop, who manages the Hana IT Korea Securities Master Fund. "Its duration and magnitude may not match memory chips, but such a cycle is expected to start as well. That is why I am most bullish on this sector."
The semiconductor industry has experienced a ripple effect in pricing - AI demand first started with high-end products such as high-bandwidth memory (HBM), and once those supplies tightened and prices rose, the boom spilled over to everyday chips and components such as ordinary DRAM and NAND. A similar dynamic may be playing out in packaging substrates, where price increases first appeared in high-end products.
The benefits of the AI supply chain have expanded beyond memory
Samsung Electro-Mechanics is one of the global leaders in AI substrates and MLCC, and its stock price has more than tripled this year, far outpacing memory chip makers. Samsung SDI shares also roughly doubled. Despite the recent selloff, Korea-focused funds are still on track for a bumper year, with the Kospi up about 35% cumulatively.
Lee Wang-seop said his fund's outperformance versus the benchmark was largely due to early positioning in front-end chip equipment makers such as TES Co.
Gradual gains
Hana's fund remains slightly overweight Samsung Electronics and SK Hynix to keep an eye on the two companies' enormous influence on the market. But he said investors must contend with the following uncertainties: whether AI investment can remain resilient amid persistent inflation, rising borrowing costs and intensifying competition from Chinese chip makers. He is closely watching Korean chip makers' 2027 earnings expectations, a outlook on which the market is divided, and where there is potential upside if analysts raise forecasts. Another indicator he is watching: whether foreign investors will continue selling Korean stocks after SK Hynix completes its share buyback program.
"A rebound of the magnitude seen in the past will be difficult to repeat for Korean memory chip makers," he said. "We will see some sectors deliver stock price returns that exceed semiconductors."
Comments