Key Takeaways: South Korea's two largest chipmakers rebounded sharply as Wall Street coverage and a rush to unwind bearish positions reversed a July selloff.
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SK Hynix jumps 8%, Samsung 4% as short covering lifts chips
SK Hynix's US-listed shares closed 8.2% higher at $153.38 on Tuesday, while Samsung Electronics gained nearly 4%, as a wave of analyst initiations and short covering reversed a month-long selloff in Korean memory stocks.
"SK Hynix is the memory leader for the AI era," Sebastien Naji, analyst at William Blair, said in initiating coverage with a $260 target.
At least six brokerages began covering SK Hynix's American depositary receipts with Buy-equivalent ratings. Stifel's Brian Chin set a $240 objective, while Rosenblatt Securities assigned an aggressive $320 target. The moves followed Moody's upgrade of SK Hynix's debt rating to A3 from Baa1, citing strong profitability and cash generation over the next 12 to 18 months.
The rebound reflects a positioning reset rather than a fundamental shift. Citi analyst David Chew said short positioning had become sufficiently one-sided that any stabilization in AI sentiment could trigger a short-covering rally. SK Hynix ADRs trade at roughly 5 times forward earnings, a fraction of the multiple assigned to US peers like Micron Technology.
The surge carried into Seoul, where SK Hynix shares gained over 8% by late morning Wednesday and Samsung rose nearly 4%, pushing the Kospi more than 5% higher. Foreign investors and institutions were net buyers.
The scale of the move reflected a one-sided market. July's correction was intensified by leveraged exchange-traded products, margin calls, and the liquidation of crowded positions in Samsung and SK Hynix. Assets in single-stock leveraged ETFs tied to the two chipmakers collapsed from $50 billion in late June to $17 billion last week, according to market data.
JPMorgan strategists led by Rajiv Batra said the leveraged ETF unwind was complete and hedge-fund deleveraging was about 90 percent finished. But William Brattan of BNP Paribas noted that long-only investors remained reluctant to manage holdings that move with such violence, explaining why a favorable Wall Street close produced only limited support in Seoul on Tuesday.
Memory fundamentals remain tight
The industry outlook is stronger than July's stock collapse suggested. SK Hynix reported Q2 revenue of 79.32 trillion won ($54.6 billion), up 257 percent year over year, with DRAM average selling prices jumping 30 percent sequentially and NAND prices soaring 50 percent. Gross margins expanded to 83 percent from 54 percent a year earlier, while operating margins climbed to 76 percent.
The company said hyperscalers continue to request more memory supply as they build out AI infrastructure. HBM4 will ramp in the second half of 2026, and SK Hynix has locked in long-term agreements with about 10 customers. Capital expenditures are planned in the high-40 trillion won range ($27.6 billion).
Samsung has said memory supply should remain tight through 2027, supported by multiyear customer contracts. The company's DRAM scale allows it to benefit when constrained supply lifts prices across the market.
China supply fears linger
ChangXin Memory Technologies (CXMT) remains the clearest industry concern. The Chinese DRAM maker is considering another plant in Beijing, which could more than double its capacity if planned projects are completed. Morningstar analyst William Kerwin noted CXMT accounted for only about 6 percent of global DRAM production last year, limiting its immediate ability to disrupt Samsung, SK Hynix, and Micron. But simultaneous expansion by all four producers could pressure prices by 2028, he warned.
SK Hynix's US listing trades at a 37.5 percent premium to its Seoul-listed shares, reflecting easier access for US investors and a narrowing valuation discount to Micron. The company's DRAM market share slipped 13 points to 26 percent, yet Wall Street's bullish initiations suggest confidence in its HBM leadership tied to Nvidia accelerators.
For investors, the question is whether the rebound marks a durable bottom or a technical bounce within a broader correction. SK Hynix's forward P/E of roughly 5 times and Samsung's broader memory exposure offer different risk profiles. The tight supply narrative through 2027 supports both, but the memory cycle's history of violent reversals keeps the risk premium elevated.
This article is for informational purposes only and does not constitute investment advice.
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