Author: Zhou Ailin, Tencent Finance
On June 2nd, the South Korean KOSPI index hit a new historical high, reaching 8801.49 points, rapidly approaching Goldman Sachs' target price of 9000 points.
The past May will also go down in history. In the last week of May 2026, a historic event occurred in the global memory chip industry—Samsung Electronics (005930.KS), SK Hynix (000660.KS), and Micron Technology (MU.US), the three memory giants, successively achieved the feat of surpassing one trillion US dollars in market capitalization within just a few weeks. In terms of the increase over the past year, Samsung Electronics is about +308%, SK Hynix is over +900%, Micron Technology is over +800%, and SanDisk (SNDK.US) is over +3542%.
On May 27, Samsung officially signed a labor agreement, and its stock price rose by as much as 8% that day, with the KOSPI breaking through 8,000 points to reach a new historical high. Foreign media headlines were unanimously about "the strike crisis being resolved" and market pricing confirming an "AI supercycle." However, on the same day, a set of data was overshadowed by the noise of this celebration. South Korean retail investors, whom the market calls "Sam-nix" (a combination of Samsung and SK Hynix), net bought approximately 20 trillion won (about $13.2 billion) worth of Hynix shares. At the same time, foreign investors were net sellers for 12 consecutive trading days (May 7-22), with a cumulative net sale of over 46 trillion won, of which 82.9% was concentrated in Samsung Electronics and Hynix stocks. In fact, what happened in South Korea is no longer limited to the local area, but concerns the global storage investment sector and the entire AI industry chain, not to mention that China's Changxin Technology has just passed its IPO review. Investment bankers told Tencent Finance that the withdrawal of foreign capital was passive, mainly because the surge in the KOSPI index was led by Samsung and SK Hynix, and its index weighting had exceeded the US-mandated diversified holding limit (the weight of a single or a few stocks cannot exceed 25%). On May 27, Jongmin Shim, Deputy Head of International Korea Research at CITIC Securities, mentioned at an internal client meeting that "(the storage industry) no longer has cyclicality. At least in the near term, in terms of performance growth and valuation, (the Korean stock index) needs to rise by at least 30% to reach the average level." This means that the KOSPI index will break through 10,000 points. "The most heated debate among investors right now is whether the cyclical nature of the storage sector still exists," said Jongmin Shim. In his view, with the successive signing of long-term agreements and the explosive growth of AI, the cyclical nature of the storage sector has disappeared at least in the last two years. A storage industry expert told Tencent Finance that storage accounts for as much as 40% of the value of AI servers, mainly due to the continuous increase in storage capacity and significant price increases. Last year, storage accounted for less than 20% of AI server value. After this year's price increase, the storage share has quadrupled. The increase in storage capacity is mainly due to the continued growth in demand for high-capacity storage from AI servers, especially the increase in the number of tokens, leading to continuous increases in DRAM capacity. HBM is mainly used for critical data accessed frequently, DRAM is used for data that is frequently accessed but not the most frequently accessed, and NAND is used to store low-frequency data or data that requires long-term memory. Leading storage companies have successively signed long-term investment agreements (LTAs) with hyperscale cloud providers (CSPs). UBS believes this is structurally changing the profit model and valuation model of the storage industry. This is why UBS significantly raised its target price for Micron Technology, another leading US storage company, from $535 to $1625, a 204% increase. The core logic is that Micron's earnings per share are expected to remain above $100 per share from 2027 to 2029, and its stock should align with mainstream semiconductor leaders like Nvidia, enjoying a higher valuation multiple. What are the main contents of long-term contracts? What terms are typically included in long-term contracts with major US customers? In response, the aforementioned expert told Tencent Finance that long-term contracts mainly target major US customers, involving specific quantities and prices. Manufacturers are only willing to expand production after the price is locked in. Previously, after long-term contracts were signed, they were executed when prices rose, but customers might default when prices fell, putting storage manufacturers in a weak position. Now, manufacturers are becoming more assertive, demanding guarantees of delivery, deposit payments, and compensation clauses, and locking in prices in advance, so they will expand production. If an agreement is reached, the price in 2027 may be locked in in advance. While long-term agreements are typically three to five years, the actual quantity may be finalized within three years, with prices locked in for 2027 and 2028, and deposits paid in installments. Industry insiders also point out that investors were previously more concerned about storage companies expanding production and causing overcapacity. Furthermore, previous long-term agreements with US clients were not formal contracts, but rather memorandums of understanding, lacking legal force and only specifying quantities, not prices. However, the agreements signed now are formal, and storage companies will only expand production after the agreements are signed. Acecamp, a third-party independent research firm, predicts that after mid-2026, Samsung's HBM market share will gradually catch up with SK Hynix, with Hynix projected at approximately 45%, Samsung at approximately 35%, and Micron at approximately 20%. Previously, Hynix's HBM share was approximately 50%, and Samsung's was approximately 28%. BOCI predicts that Samsung HBM's market share will reach 29.4% in 2026, SK Hynix 52.2%, and Micron 18.4%, suggesting that Samsung's catch-up speed may be faster than market expectations. Currently, there is no excessive concern about overcapacity. Industry insiders believe that the supply-demand imbalance for wafers will remain unchanged this year, but may change next year, mainly in terms of capacity. After the signing of long-term industry agreements, companies will accelerate capacity expansion, but the expansion will be limited, with a slight increase expected by the end of 2028, resulting in little overall change. Large-scale capacity expansion is expected in 2029 and 2030. Retail investors are buying, foreign capital is leaving. Despite strong fundamentals, a surprising phenomenon has emerged in the market—institutional funds, representing savvy investors, are withdrawing, while retail investors continue to increase their positions. Who is wrong? In fact, these two seemingly contradictory behaviors are not contradictory, because institutions are not voluntarily reducing their positions. South Korea has approximately 14 million retail investors, accounting for about a quarter of the total population. Every time the market crashes, they buy against the trend; every time a new high is reached, new funds flow in. This buying is not just speculation, but also an emotion—faced with high inflation and limited social upward mobility, people's anxiety about not wanting to miss the AI feast and fearing being left behind has found an outlet in their stock accounts. On May 27th, the Samsung labor agreement was officially signed. On the same day, South Korean retail investors net bought approximately 20 trillion won (about $13.2 billion) worth of Hynix shares. This shows that while South Korean workers were vying for a share of AI profits at the negotiating table, South Korean retail investors were betting their hard-earned money on the same feast in the stock market. However, foreign investors were net sellers for 12 consecutive trading days (May 7th to 22nd), with a cumulative net sale of over 46 trillion won, of which 82.9% was concentrated in Samsung Electronics and Hynix stocks. Most institutions believe this does not reflect a deterioration in long-term investor sentiment. A report released on May 25th by Timothy Moe, Chief Strategist for Asia Pacific at Goldman Sachs, discussed the $62 billion withdrawal: Is it the end or just the beginning? Goldman Sachs noted that the recent market rebound was led by Samsung and SK Hynix, whose index weightings have exceeded the diversified holding limits stipulated by the U.S. Investment Company Act of 1940. It is estimated that the total size of funds focused on the South Korean market is close to $200 billion, with the two semiconductor giants accounting for over 25% of the total. Foreign investors have continued to net sell off KOSPI this year, with a cumulative net outflow of approximately $62 billion, of which the two semiconductor giants contributed approximately $57 billion. This large-scale sell-off has pushed foreign ownership of the South Korean semiconductor sector to a 10-year low. If the combined weighting of the two stocks increases by another 1 percentage point, it will trigger an additional passive outflow of approximately $2 billion. However, Goldman Sachs emphasized that most of the foreign-driven sell-off may be nearing its end. This type of sell-off is entirely driven by portfolio rebalancing and authorization constraints, and is unrelated to fundamentals. If market concentration decreases, or if sectors such as defense, shipbuilding, and power infrastructure improve, a new round of foreign capital inflows is expected. How much further can the storage sector rise? Faced with a near-frenzied market, volatility will undoubtedly intensify, but many investors seem to believe the boom is continuing. Profitability is key to digesting valuations; even after the surge, the valuations of South Korea's two largest giants are still below double digits. Jongmin Shim stated that the ROE of the South Korean stock market has soared to 24%, six percentage points higher than the average of major developed and emerging markets, but valuations remain low (single digits). The semiconductor sector undoubtedly boosted the overall profit margin of the South Korean market, but many other sectors also contributed to the index's revenue growth, such as securities firms, defense, other AI sectors, and shipbuilding companies. Currently, institutional forecasts for next year's profit margins remain relatively low, although analysts typically don't begin to revise their forecasts upwards until September. "The cyclical nature of the market is gone, at least in the near term. It needs to rise by at least 30% to reach the average level. Our advice to clients is to continue holding export-oriented companies," he said. "In 2002, South Korea experienced a financial crisis triggered by a credit card crisis, which dragged down the capital market. However, apart from that, only external factors could drive significant changes in the stock market. I believe that as long as demand in both China and the US remains healthy, the bull market is unlikely to end abruptly." Historically, the South Korean government has often supported the technology industry, with recent support for the semiconductor sector being even greater. For example, South Korea recently announced a 150 trillion won, five-year public-private partnership policy fund, of which 30 trillion won will be in place by 2026, focusing on supporting the entire ecosystem of advanced strategic industries such as artificial intelligence, semiconductors, biotechnology, and rechargeable batteries. "Retail investors can also participate, and the government has limited the lower limit. But this is not the main driving factor for the bull market; the main driving factor is the enormous demand from US tech giants. Improved ROE and corporate governance are also expected to help the index rise by ten percentage points," said Jongmin Shim. However, several international institutional investment managers told Tencent Finance that while the storage market is booming, the current strong demand is merely smoothing out the cycle, but the cycle will eventually return to normal. The soaring storage costs have impacted both home appliance and mobile phone manufacturers. Mobile phone models priced below 1,000 yuan have virtually disappeared, and home appliance companies have also been severely affected. Therefore, it is still necessary to closely monitor the industry's turning point.
Miyuki
Weiliang
Joy
Alex
Brian