TradingKey - South Korean brokerage KB Securities pointed out in its latest research report that memory semiconductor inventories at Samsung Electronics and SK Hynix (SKHY) have dropped to less than 10 days of supply, and available supply next year will be significantly insufficient.
The firm added that as artificial intelligence infrastructure investment expands at an unprecedented pace, the memory chip market is facing a severe supply shortage. A key factor exacerbating the supply shortage is the transition to next-generation High Bandwidth Memory HBM4.
The firm believes that HBM4 requires about three times as many wafers as traditional DRAM. Due to limited wafer capacity, the full-scale mass production of HBM4 will inevitably reduce available capacity for traditional DRAM. KB Securities expects that DRAM and NAND demand will consequently exceed supply by more than 10 percentage points next year.
KB Securities stated that despite the supply deficit in the memory market, stock prices of both Samsung Electronics and SK Hynix have pulled back significantly over the past period, with Samsung Electronics falling nearly 28% from its peak and SK Hynix dropping nearly 40%. The decline in stock prices for both companies is related to a broad pullback in memory stocks and excessive leverage in the South Korean stock market.
While the stock price declines reflect market concerns, analysts said the stocks of the two companies are severely undervalued relative to their fundamentals, with earnings expected to hit record highs for three consecutive years. Given market expectations that large-scale shareholder return policies will continue, the current period may mark the beginning of a significant valuation increase for the semiconductor industry.
SK Hynix ADR stock price chart, Source: TradingView
Looking at the SK Hynix ADR stock price chart, after rebounding from around $151.50, the stock price gradually recovered the 0.236, 0.382, 0.5, 0.618, and 0.786 Fibonacci retracement levels and is currently approaching the period high of $178.41. Coupled with SK Hynix's 8.26% gain in South Korean equities today, the ADR is expected to break through this price level tomorrow.
Regarding moving averages, there remains some distance between the current price and the 5-day moving average, indicating a strong trend, but it also means that if short-term profit-taking occurs, the $172.65–$172.78 range will be tested first.
The most critical confirmation level currently is the need to break above the period high of $178.41 tomorrow without falling below it on a pullback. On the upside, attention can further focus on the 1.272 Fibonacci extension level ($185.73), and if the strength continues, the 1.618 Fibonacci extension level ($195.04).
If resistance is encountered repeatedly near $178.41, caution is needed against a false breakout near the previous high. The price may first pull back to near the 0.786 Fibonacci retracement level ($172.65) and the 5-day moving average ($172.78).
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