Samsung Electronics, SK Hynix, Microsoft, Meta, and Amazon are set to announce earnings results this week, putting the recent semiconductor peak theory to the test. The earnings season is expected to serve as a checkpoint for evaluating both the memory market conditions and AI investment trends, according to securities firms. Market attention has shifted beyond memory market conditions and high bandwidth memory supply-demand forecasts to focus on whether Big Tech companies can sustain massive AI investments and whether they possess the cash generation capability and funding capacity to support such spending.
SK Hynix and Samsung Electronics Report Record Quarterly Earnings Estimates
According to financial information provider FnGuide on the 27th, SK Hynix's Q2 revenue is estimated to increase 278.6% year-over-year to 84.1693 trillion won, with operating profit rising approximately sevenfold to 64.2448 trillion won. Samsung Electronics previously announced preliminary results showing revenue of 171 trillion won and operating profit of 89.4 trillion won, signaling a record quarterly performance.
Investors are focusing more on memory supply-demand forecasts, long-term supply agreements, and AI investment sustainability explanations expected during conference calls rather than the strong earnings themselves.
Market Focus Shifts from Investment Scale to Cash Generation Capability
This shift in focus has also appeared in recent US Big Tech earnings reports. Alphabet exceeded market expectations and raised its capital expenditure plans for this year, but its stock price declined as free cash flow turned negative.
Choi Bo-young, a researcher at Kyobo Securities, stated that the recent semiconductor stock price adjustment reflects a reassessment of investment recovery speed rather than AI demand slowdown, noting that while AI demand remains solid, the market's focus is shifting from growth to capital efficiency and cash generation capability.
Kim Jae-seung, a researcher at Hyundai Motor Securities, said that whether companies can generate stable cash from existing businesses rather than AI investment scale will be key to recovering semiconductor investment sentiment in these earnings reports.
Funding burden from AI investment expansion has also emerged as a new variable. As companies increase corporate bond issuance and borrowing to support AI investments, capital procurement costs are rising sharply amid high interest rates and oil price increases. The recent rise in credit default swap spreads for some hyperscaler companies reflects these concerns, according to analysts.
Park Sang-hyun, a researcher at iM Securities, noted that deteriorating free cash flow and expanding large-scale corporate bond issuance by hyperscalers will be variables the market watches for the time being.
Memory Market Outlook Remains Positive Despite Valuation Concerns
The outlook for the memory market itself remains positive. Securities firms believe that recent concerns about NAND market slowdown have been largely reflected in stock prices, and DRAM supply shortages due to HBM production expansion are likely to intensify. Long-term supply agreement expansion and AI data center investment are also evaluated as factors enhancing mid- to long-term earnings visibility.
Kim Dong-won, head of KB Securities Research Division, stated that stock price volatility and semiconductor industry fundamentals need to be viewed separately, noting that HBM production expansion will make general-purpose DRAM supply tighter, likely leading to memory price increases.
Experts say the recently raised semiconductor peak theory should not be interpreted identically to earnings slowdown. They explain that the industry itself declining and profit growth rate slowing due to base effects from last year's strong performance are fundamentally different issues.
However, cautious views suggest that since semiconductor profits and Big Tech capital investment growth rates may slow next year compared to this year, responding while monitoring related indicators is necessary.
Heo Jae-hwan, a researcher at Eugene Investment & Securities, stated that while semiconductors remain the sector with the highest earnings visibility, next year's semiconductor profits and Big Tech capital investment growth rates will be difficult to exceed this year's levels, adding that while it is too early to conclude the corporate profit growth trend has ended, time is needed to confirm US high-yield rates, Big Tech profitability, and whether market expectations are being lowered.
FAQ
What earnings results are Samsung Electronics and SK Hynix expected to announce this week?
Samsung Electronics announced preliminary Q2 results showing revenue of 171 trillion won and operating profit of 89.4 trillion won, representing a record quarterly performance. SK Hynix's Q2 revenue is estimated at 84.1693 trillion won, up 278.6% year-over-year, with operating profit rising approximately sevenfold to 64.2448 trillion won, according to FnGuide on the 27th.
Why is the market focusing on cash generation capability rather than AI investment scale?
Market focus has shifted because Alphabet's stock price declined despite exceeding expectations and raising capital expenditure plans, as its free cash flow turned negative. Choi Bo-young of Kyobo Securities explained that while AI demand remains solid, the market's attention is moving from growth to capital efficiency and cash generation capability, reflecting reassessment of investment recovery speed rather than AI demand slowdown.
