Samsung Elec, SK hynix slide as AI investment concerns weigh on chip stocks

The stocks of South Korean chipmakers Samsung Electronics Co. and SK hynix Inc. fell in early trading Tuesday amid lingering caution over artificial intelligence (AI)-related investments.

SK hynix was trading at 1.228 million won ($925.26) as of 9:14 a.m., down 3.84 percent from the previous session.

After opening 0.94 percent lower at 1.265 million won, the stock quickly extended its losses, plunging to 1.213 million won at one point, down 5.01 percent.

Foreign securities firms, including HSBC Holdings Plc and JPMorgan Chase & Co., were among the leading sellers of SK hynix shares.

Shares of Samsung Electronics Co. were also down 0.8 percent at 216,250 won as of the morning session.

Samsung Electronics fell as low as 213,000 won, down 2.29 percent, shortly after the open before recovering some of its losses.

Overnight on Wall Street, the Nasdaq Composite Index closed 1.11 percent higher as bargain-hunting investors flocked to artificial intelligence (AI) and semiconductor stocks.

The Philadelphia Semiconductor Index also rebounded 1.61 percent after nine consecutive sessions of losses, its longest losing streak since October 2008.

However, intraday trading showed signs of caution, with neocloud company CoreWeave Inc., which had surged nearly 8 percent in early trading, closing down 0.4 percent.

The Philadelphia Semiconductor Index also pared its gains after jumping as much as 3.7 percent earlier in the session.

This lingering cautious sentiment toward investment in the AI value chain appears to have spilled over into the Korean stock market, weighing on the two major semiconductor stocks.

Foreign and institutional investors were net sellers of 112.9 billion won and 142.8 billion won, respectively, on the Kospi market as of the morning session, while retail investors were net buyers of 220.5 billion won.

In the Kospi’s electrical and electronics sector, which includes Samsung Electronics and SK hynix, foreign and institutional investors were net sellers of 127.3 billion won and 102.4 billion won, respectively, while retail investors were net buyers of 196.5 billion won.

Separately, shares of Hyundai Rotem Co. plunged more than 10 percent in early trading after the manufacturer of rail solutions and defense products reported earnings that fell short of market expectations.

Hyundai Rotem shares were trading at 89,900 won as of 9:24 a.m., down 10.72 percent from the previous session.

The stock had fallen as much as 12.02 percent to 88,600 won earlier in the session.

The sharp decline appeared to reflect the company’s weaker-than-expected earnings announced on Monday.

Hyundai Rotem’s third-quarter operating profit fell 11 percent on year to 247.1 billion won, nearly 10 percent below the market consensus estimate of 273.7 billion won.

Securities firms have also raised concerns about uncertainty surrounding the company’s future orders.

“A significant number of orders expected to be secured this year are likely to be pushed back to next year as negotiations in Iraq have somewhat stalled due to the prolonged war in the Middle East,” said Lee Han-gyeol, an analyst at Kiwoom Securities Co.

Baek Joo-ho, an analyst at Hyundai Motor Securities Co. also noted that “concerns over a potential gap in defense exports and declining profitability due to delays in new orders next year are likely to weigh on the company.”

“Although next year’s revenue is expected to remain at a level similar to this year’s, operating profit could decline due to a lower proportion of exports and an expansion of low-margin domestic projects,” he added.

Kiwoom Securities lowered its target price for Hyundai Rotem from 240,000 won to 195,000 won.

Other securities firms also revised down their target prices, including iM Securities Co. from 280,000 won to 190,000 won, Samsung Securities Co. from 250,000 won to 156,000 won, and Shinhan Securities Co. from 230,000 won to 150,000 won.

Meanwhile, Ellice Inc., a full-stack AI and cloud education and enterprise company, saw a plunge of more than 30 percent during its debut on the secondary Kosdaq market on Tuesday.

Ellice shares were trading at 62,200 won as of 9:10 a.m., down 31.27 percent from its initial public offering (IPO) price of 90,500 won.

The stock opened lower at 75,700 won and fell as low as 61,000 won at one point.

Founded in 2015, Ellice Group is a software development and supply company whose main products and services include artificial intelligence transformation (AX) and AI cloud solutions.