Korean Chip Stocks' Retreat Partly Reflect Skepticism About Earnings Sustainability

Dow Jones10-13

0621 GMT - South Korean chip stocks' retreat, despite elevated profit estimates for semiconductor companies amid the artificial-intelligence boom, may partly reflect investors' skepticism about the sustainability of earnings, KB Securities' E.T. Lee and D.E. Lee say. Shares of Samsung Electronics and SK Hynix were last down about 9% and 10%, respectively, putting them on track for a fifth consecutive session of losses. "Investors still appear to view semiconductors as a cyclical industry and remain skeptical about the sector's ability to generate sustained earnings," the analysts write in a note. While bottlenecks can drive a surge in profits during boom periods, their eventual easing can lead to excess inventory and overinvestment, they say. Similar patterns emerged in sectors such as diagnostic kits, masks, toilet paper and container shipping after the pandemic, they add.

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