Memory-oriented semiconductor stocks have experienced a rapid pullback in the past two weeks, but one sell-side analyst says the weakness looks driven by short-term sentiment rather than a change in underlying industry dynamics.
Shares of three major memory suppliers moved markedly lower during the period: Micron fell about 30%, SK Hynix declined approximately 24%, and Samsung Electronics slipped near 20%. Market participants cited heightened geopolitical risk in the Middle East and worries surrounding Google’s TurboQuant - an AI efficiency technology - as catalysts for the selling pressure.
Jeff Kim, head of research at KB Securities, maintains a different view. He notes that "despite geopolitical uncertainties and concerns over interest rate volatility, AI data center capex is continuing to rise in 2026 and chip orders in 2Q26 are exceeding expectations." In his assessment, the recent retreat in memory stocks was largely "caused by profit-taking driven by overblown concerns, not by weakened fundamentals."
Earnings and margin outlook
Kim lays out an optimistic earnings trajectory for the two South Korean manufacturers. He projects combined 2026 operating profit for Samsung Electronics and SK Hynix at 397 trillion Korean won, which would represent a 337% increase year-on-year. Within that total, Samsung is forecast to generate 220 trillion won in operating profit with DRAM margins around 74% and NAND margins near 58%. SK Hynix is projected to contribute 177 trillion won in operating profit, with DRAM margins at about 78% and NAND margins at roughly 56%.
Those forecasts help explain why valuations have compressed: 12-month forward price-to-earnings multiples are now positioned in the low single digits across the trio of chipmakers mentioned. Kim cites forward P/E readings in the range of 3-5x - specifically, 5.3x for Samsung Electronics and 3.7x for both SK Hynix and Micron - and comments that "valuations are near historical lows, which suggests limited downside."
On AI efficiency technologies and longer-term demand
Some investors have expressed concern that technologies like TurboQuant, which aim to improve AI efficiency, could reduce demand for chips. Kim disputes that conclusion. He argues such efficiency advances "should lower entry barriers while driving longer-term computing demand, chip content, and ultimately, AI demand."
Putting the present cycle in context, Kim draws parallels to earlier technology-driven expansions. He points to the PC proliferation beginning around 1995 and the 2007 introduction of the iPhone as examples that seeded more than a decade of structural growth in underlying device markets. By comparison, he views the AI cycle - which he says began taking shape in 2023 - as still being in an early phase.
Given the positioning of memory chips as a strategic element of AI infrastructure, Kim concludes that the current market correction "will be short" and implies that a longer rally could follow as fundamentals reassert themselves.
Bottom line
The rapid drop in memory equities over a recent two-week window has left valuations low by historical standards and produced sharp moves in individual names. While geopolitical events and new AI efficiency tools have been cited as near-term triggers for selling, KB Securities' analysis attributes the decline to profit-taking against a backdrop of improving demand indicators and a materially stronger 2026 earnings outlook for major memory manufacturers.