Korean stocks face a critical week as Alphabet, Google's parent company, is scheduled to release earnings on July 23 Korean time, marking the start of a Big Tech reporting season that will determine the sustainability of AI investment cycles. The earnings announcements come as the KOSPI experienced extreme volatility the previous week, plunging 8.95% on July 13 before rebounding 6.24% on July 15 and falling again 6.37% on July 16, with circuit breakers and sidecars triggered on three out of four trading days. Market analysts attribute the turbulence to concerns over AI investment overheating and debates about whether the semiconductor sector has reached a cyclical peak, with Samsung Electronics and SK Hynix particularly sensitive to guidance from hyperscalers including Alphabet, Microsoft, Amazon, and Meta on future capital expenditure plans for AI infrastructure.
KOSPI Records Extreme Volatility in Previous Week
The Korean stock market experienced unprecedented turbulence during the previous week, with the KOSPI index falling 8.95% on July 13, rebounding 6.24% on July 15, and dropping 6.37% again on July 16. Circuit breakers and sidecars were triggered on three out of four trading days during this period. Securities industry sources identified global AI overheating concerns and debates over semiconductor sector cyclical peaks as the primary drivers behind the market instability.
Analysts Identify AI Capital Expenditure Guidance as Key Market Driver
Securities analysts have identified the capital expenditure guidance from hyperscalers as the critical factor for market direction. Lee Jae-won, a researcher at Yuanta Securities, stated that "Alphabet is one of the hyperscalers investing the most money in AI service development along with Microsoft, Amazon, and Meta," adding that "if the conference call after the earnings announcement sufficiently explains the reasons for investment expansion and future strategy, market concerns can be alleviated to some extent." Kang Jin-hyuk, senior researcher at Shinhan Investment Securities, explained that "the cause of the recent adjustment is ultimately skepticism about AI capital expenditure and debate over the nature of memory profits," noting that "the capital expenditure guidance from hyperscalers led by Alphabet will be key." Hwang San-hae, researcher at LS Securities, analyzed that "ultimately, whether capital expenditure increases accompanied by cloud growth, AI monetization, and cost efficiency will determine future direction," and "the memory industry is also likely to be linked not simply to capital expenditure increase benefits but to AI investment justification and return on investment verification."
Following Alphabet's earnings on July 23 Korean time, Tesla and Intel are scheduled to release their results during the same week. Market participants are focusing on guidance regarding AI infrastructure investment rather than the earnings figures themselves. Analysts note that if companies reduce or maintain current investment levels, this could be interpreted as a signal of slowing AI demand, negatively affecting investor sentiment toward semiconductor and AI-related companies in both the United States and South Korea. During the first quarter, US Big Tech companies expanded AI capital expenditure and raised related guidance, which triggered a technology stock rally centered on semiconductors.
South Korea Q2 GDP Announcement Scheduled This Week
South Korea's second-quarter GDP announcement is scheduled for this week. Market participants expect to confirm the extent of semiconductor exports' contribution to growth and whether domestic demand has recovered.
FAQ
When is Alphabet scheduled to release earnings?
Alphabet is scheduled to release earnings on July 23 Korean time, followed by Tesla and Intel during the same week.
What caused the KOSPI volatility in the previous week?
The KOSPI experienced extreme volatility with an 8.95% drop on July 13, a 6.24% rebound on July 15, and a 6.37% decline on July 16, driven by concerns over AI investment overheating and debates about semiconductor sector cyclical peaks, with circuit breakers and sidecars triggered on three out of four trading days.
Why are analysts focusing on capital expenditure guidance from hyperscalers?
Analysts identify capital expenditure guidance from hyperscalers including Alphabet, Microsoft, Amazon, and Meta as the key factor determining AI investment cycle sustainability and the direction of semiconductor stocks like Samsung Electronics and SK Hynix, with Lee Jae-won of Yuanta Securities stating that sufficient explanation of investment expansion reasons during conference calls can alleviate market concerns.
