BofA’s Simon Woo Says Semiconductor Cycle Is Intact, Selloff Creates Buy-the-Dip Chance

Simon Woo, head of Korea research at Bank of America, said the semiconductor cycle is unlikely to break down easily. He said the recent plunge in chip stocks has been overdone, creating an opportunity for investors looking to buy the dip.

Technology shares in South Korea and abroad, led by semiconductor stocks, have undergone a sharp correction as the artificial intelligence rally lost momentum.

“In past episodes when semiconductor stocks fell 50% to 60%, there were data points backing a downturn, such as falling memory prices or a surge in inventories,” Woo said. “This time, shares collapsed even though every metric, including third-quarter earnings, is better than ever. The selloff has been excessive, so this is a time to look for bargain buys.”

Woo also pointed to long-term agreements, or LTAs, as a pillar supporting the chip market. “Unless there is an extreme macroeconomic shock or a major default event, LTAs work powerfully in a supply shortage,” he said. “For semiconductor companies, that effectively means margins are well secured.” Even if spot prices fluctuate, LTAs are likely to remain firmly in place as long as supply stays tight.

He also played down the chances that hyperscalers, or large cloud and data-center operators, will scale back investment. While cash flow has come under pressure and regulatory concerns remain, AI-related businesses are structured so investments can be recouped through revenue within one to two years.

Woo said data-center construction financed with borrowing is likely to be completed by next year. He expects the payback period to begin in 2028.

On the demand side, Woo cited sovereign AI as a key variable. Sovereign AI refers to projects pursued by individual countries seeking to secure control over their own data. He said major projects across the Middle East, Europe and Asia could combine to drive a second global AI boom and lift semiconductor demand.