Key Takeaways:
SK Hynix and Samsung Electronics trade at 3.5x and 3.9x estimated 2027 earnings, levels Meritz Securities analyst Kim Sunwoo calls deeply undervalued.
"The degree of panic is proportional to the expected return, a lesson that deserves attention now," Kim Sunwoo, analyst at Meritz Securities, said in a report dated July 17.
Kim projects DRAM demand satisfaction will fall to 60% in 2027 from 75% to 80% in the second half of 2026, even when excluding inventory stocking. Intel's chief executive has said memory supply and pricing will not ease before 2028. Micron Technology has signed 16 long-term supply agreements with take-or-pay volume clauses that show structural demand support.
The call is contrarian. Samsung and SK Hynix shares have come under pressure as investors worry about oversupply in 2027. Kim argues the market is misreading fragmentary information as the full picture, and that upcoming shareholder returns will reverse the pessimism. Samsung's three-year shareholder return program enters its final year, with buybacks, cash dividends and employee stock purchases expected to provide a floor. SK Hynix is studying special dividends as an additional return measure.
Market participants have expressed concern that SK Hynix may have offered price concessions to secure long-term supply agreements with large technology companies. Kim rejected that interpretation, describing the deals as upfront investment to capture the generative AI and AI data center market. SK Hynix and its parent SK Group have announced plans to formally advance their AIDC business from the second half of this year, with partnerships involving US technology companies and frontier model developers expected to emerge. The collaborations may take the form of joint ventures, equity investments or usage commitments.
The valuation gap between memory makers and other semiconductor stocks is stark. Nvidia trades at about 35x forward earnings, while ASML and TSMC command multiples above 20x. Kim argues the memory sector's commodity perception is outdated, as HBM and high-capacity DRAM become differentiated products tied to AI infrastructure buildout.
The 3.5x multiple on 2027 earnings implies the market is pricing in a severe downturn that Kim believes will not materialize. If his thesis is correct, the re-rating potential is significant for both stocks. Investors will watch for Samsung's shareholder return announcements and SK Hynix's AIDC partnership disclosures in the coming months as the next catalysts.
This article is for informational purposes only and does not constitute investment advice.
