Seoul - Samsung Electronics (KS:005930) and SK hynix have together rallied 798% from their 500-day low as of Monday, a pace that Jefferies says has now eclipsed the 717% rise those stocks logged during the IT bubble, the firm said in its note.
The rally for the two South Korean semiconductor names started in late May and has since accelerated. Jefferies sees further upside potential in the move, arguing that bubble dynamics often amplify the dominance of the best-performing stocks and can render them historical outliers. The bank also points to continued support for the rally from both earnings and retail investor participation.
Volatility and trading implications
Jefferies cautioned that the path forward will not be smooth. The firm said volatility tends to rise in the later phases of such rallies, complicating the task of separating short-term market noise from longer-term trends. Jefferies noted that investors experienced elevated volatility in March and that similar episodes are likely to recur multiple times going forward.
Under these elevated volatility conditions, the firm suggested that active, short-term trading strategies that attempt to buy low and sell high may underperform a simple buy-and-hold approach. Jefferies added that day-to-day trading choices made during volatile stretches can materially affect the returns investors realize weeks or months later.
Warning signs to watch
Jefferies outlined several indicators that could presage a more pronounced collapse of the rally. Those include a broad economic slowdown, interest rates rising to a level that cannot be reversed, or a scenario in which artificial intelligence firms fail to secure funding. Despite outlining these risks, the firm said it currently believes there is still time before any of these warning signs materialize.
The note underscores a balance Jefferies sees between the momentum that has pushed Samsung and SK hynix past previous bubble-era gains and the growing potential for intermittent, higher-amplitude swings in price. Investors and market participants are advised to factor in both the continued upside drivers and the risk of heightened volatility when assessing positions in these semiconductor stocks.