Samsung, SK Hynix Slump 27% and 33% in July. What Could Revive Chip Stocks?

Samsung Electronics and SK Hynix shares have fallen 26% and 33% this month

Brokerages are watching U.S. hyperscaler earnings due later in July

Chip stocks have remained under pressure despite strong earnings from global companies, and brokerages say results from U.S. hyperscalers due later in July could provide a catalyst for a rebound.

According to the Korea Exchange on July 20, the Kospi has fallen 23.13% so far this month. Over the same period, Samsung Electronics and SK Hynix, South Korea’s two biggest chip stocks, dropped 26.95% and 33.43%, respectively. Weakness in semiconductor shares, which had helped lead the Kospi higher, has added to the broader market correction.

Brokerages say earnings reports from hyperscalers including Google, Microsoft, Amazon and Meta could become a turning point for semiconductor shares.

Investors want to see whether frontier artificial intelligence model companies and hyperscalers can monetize AI investment and continue capital spending into 2028 and beyond, Hyundai Motor Securities analyst Kim Jae-seung said. Because major frontier AI model companies such as OpenAI and Anthropic are unlisted, the clearest signals on expanding AI demand, monetization and the durability of future capex will have to come from hyperscaler earnings, he said.

In the upcoming reporting cycle, Alphabet, Google’s parent, is scheduled to report on July 22. Microsoft and Meta are due on July 29, and Amazon on July 30, according to the financial investment industry.

The first point to watch is performance in their core businesses, because hyperscalers’ large AI-related capex plans rest on profit and cash flow from existing operations.

Core-business profit and cash flow will be critical this earnings season, Kim said. If profitability in legacy businesses weakens or margins decline, pressure for capex cuts could build.

Another focus is whether AI revenue growth accelerates, as the market is increasingly sensitive to momentum, or changes in growth rates.

Growth in AI cloud revenue began to accelerate in earnest in the first quarter, Kim said. If that rate slows from the previous quarter, it could come as a major shock to the market. A deceleration in AI cloud revenue growth could also heighten concern over AI commoditization, driven by the rise of Chinese AI models, broader use of multi-model strategies and falling costs per token.

If momentum in AI cloud revenue growth strengthens instead, that could bolster optimism around Jevons paradox, he added.

Investors are also watching whether hyperscalers raise capex guidance, with Alphabet and Microsoft likely to be central.

Alphabet and Microsoft remain in the AI race, but their capex relative to operating cash flow is more conservative than at Oracle, Amazon and Meta, Kim said. If those two companies raise their capex outlook or take a more aggressive stance in the AI race, expectations for a prolonged AI infrastructure investment cycle could strengthen.

If they instead reinforce their positions as late movers, citing local opposition to AI data-center investment, regulation and semiconductor prices, concern that the investment cycle is nearing a peak because of AI commoditization could intensify, he said.

Separate from those concerns, analysts say hyperscaler capex growth is likely to continue for now.

Hana Securities analyst Lee Jae-man said earnings from U.S. hyperscalers beginning in late July could serve as the trigger for a rebound in semiconductor shares. The combined capex growth rate for Alphabet, Microsoft, Meta and Amazon is projected to rise from 80% in the first quarter to 83% in the second quarter and 92% in the third quarter, he said.

The fourth-quarter forecast moderates to 79%, but the absolute growth rate remains high, Lee said. Given rising investment demand, semiconductor companies may also be able to maintain high operating profit margins.

Lee said the direction of Samsung Electronics and SK Hynix shares could also hinge on whether hyperscalers deliver earnings surprises.

Since last year, Alphabet has not missed quarterly earnings-per-share estimates, Lee said. After Alphabet posted revenue surprises, Samsung Electronics and SK Hynix recorded average one-month returns of 11% and 17%, respectively, compared with 2% and minus 3% after earnings shocks.

For Meta and Amazon, whether earnings per share come in above or below estimates affects returns for global semiconductor stocks, Lee added. For Microsoft, the key variable is whether capex beats or misses expectations.

Lee Su, Hankyung.com reporter 2su@hankyung.com