The Asia-Pacific equity research team at JPMorgan believes South Korea's third-quarter earnings season will formally begin in the week of October 19, and that the recent sharp pullback in memory chip stocks is creating a medium-term buying opportunity, with technology and financial sectors expected to be the main battlegrounds of this earnings period.
According to the latest research note published on October 15 by JPMorgan analysts including Jay Kwon, last week's preliminary results already set the tone for this earnings season: Samsung Electronics came in line with expectations, LG Electronics fell short, and LG Energy Solution beat expectations.
The note said that after visiting more than 100 investors across Asia, Jay Kwon pointed out that memory stocks have fallen about 6% over the past month and about 15% over the past three months, while the Philadelphia Semiconductor Index (SOX) rose about 10% and fell about 4% over the same periods, respectively. This divergence is providing an attractive risk-reward entry point for duration trades.
Following an overnight upside surprise in U.S. inflation, compounded by concerns over an artificial intelligence valuation bubble, South Korean stocks fell sharply again, with chip giants Samsung Electronics and SK Hynix posting especially steep declines. As of publication, both Samsung Electronics and SK Hynix had plunged nearly 10%.
Why memory stocks are at the core of the list: expectations reset quarter and duration trade logic
Over the past two weeks, Jay Kwon visited more than 100 Asian investors in Singapore, Kuala Lumpur and Hong Kong. The survey results revealed a key divergence: there is a clear disconnect between top-down conclusions on the sustainability of AI spending and bottom-up conclusions focused on memory supply-demand fundamentals, with investor sentiment notably split.
JPMorgan had previously characterized the third quarter as an "expectations reset quarter" and noted that memory stocks may remain volatile in the near term due to a lack of immediate catalysts. On the data front, memory stocks have fallen about 6% over the past month and about 15% over the past three months, while the Philadelphia Semiconductor Index rose about 10% and fell about 4% over the same periods, a sharp divergence that forms a striking contrast.
However, JPMorgan believes it is precisely this sentiment divergence and price disconnect that provide a good entry point for "duration trades" — that is, bets on the medium-term logic that the memory upcycle will be "longer and higher." Jay Kwon said that from a medium-term perspective, the risk-reward has turned favorable, and he recommends that investors accumulate on dips during the recent pullback.
Based on this view, JPMorgan identified its core overweight targets for the next six months: Samsung Electronics and SK Hynix (memory main line), Kioxia (memory), Samsung Electro-Mechanics (MLCC and substrates), ISU (AI PCB) and ISC (test sockets).
This combination covers memory chips themselves as well as upstream and downstream supporting segments, reflecting JPMorgan's systematic approach to positioning for a medium-term recovery across the entire memory supply chain rather than betting on a single segment.
Conditions that would validate the judgment and the boundaries of its invalidation
JPMorgan also provided a validation framework for the above judgment.
On the results side, it is necessary to observe whether earnings delivered in reports released starting the week of October 19 show that the technology and life insurance sectors outperform the industries classified as negative.
On the mechanism side, whether marginal changes in memory spot prices, AI-related orders and capital expenditure can support the duration judgment that the "upcycle will be longer" will be a key tracking indicator.
The bank believes the disconfirming conditions are equally clear: if memory supply and demand continue to weaken, catalysts remain absent, or broad downward revisions appear during the earnings season, JPMorgan said it would need to withdraw the above judgment. The validation window is the earnings release period from October 19 to early November 2026.
Comments