Samsung Electronics and SK hynix Plunge on Data Center Delay Concerns
Heavy Foreign Selling in Electrical & Electronics; Pharma, Autos, and Consumer Stocks Rise
Key Market Trends
① Wall Street Rises While Seoul Plunges... Semiconductors Diverge Markets
The domestic stock market tumbled as concerns over delayed data center investments following the U.S. midterm elections slammed semiconductor stocks. Related equities also weakened in Taiwan and Japan.
This marked a divergence from overnight movements in U.S. markets. In the U.S., easing political uncertainty drove the Dow Jones Industrial Average up 3%, while the Nasdaq also advanced. Hyperscalers, financials, and consumer stocks showed strength, with gains spreading to solar and travel sectors.
Conversely, major semiconductor stocks fell across the board. The drop was fueled by concerns that a Democratic election victory could slow the pace of data center construction. Market attention focused particularly on potential policy shifts in Texas, where data center investments are heavily concentrated.
② Samsung Electronics and SK hynix Plunge... Panic Selling in Supply Chain
Concerns that delayed data center investments could impact future semiconductor demand were heavily priced into the domestic market.
As Samsung Electronics and SK hynix plummeted, a sidecar circuit breaker was triggered on the KOSPI during the morning session. Stocks that had previously benefited from expectations of an industry turnaround, including Samsung Electro-Mechanics, fell in tandem, while panic selling hit semiconductor materials, parts, and equipment (SPE) suppliers.
Foreign investors executed massive net sales, centered heavily on the electrical and electronics sector. However, they bought into select sectors including IT services, pharmaceuticals, transportation and warehousing, and entertainment and culture.
Institutions also sold electrical and electronics as well as medical precision equipment, but remained net buyers across a significant number of other sectors. Driven by falling interest rates, pharmaceuticals and automobiles showed strength, alongside consumer stocks like entertainment and cosmetics, and airline shares benefiting from lower oil prices.
③ Data Centers Face ‘Adjustments’ Rather Than ‘Cancellation’… Power Costs the Core Issue
The market's primary concern is whether changes in data center policies will translate into actual declines in semiconductor demand.
Discussions surrounding data center regulations in the U.S. focus less on opposition to the industry itself and more on power consumption, local residents' electricity cost burdens, and tax incentives. If policies are adjusted to shift more costs onto corporations, the construction start dates for some projects could be delayed.
In such a scenario, forecasts for semiconductor demand could undergo some revisions. However, considering ongoing projects and long-term supply contracts, it is premature to conclude that short-term policy shifts will immediately and severely damage next year's memory earnings.
Supply & Demand and Sectors
The core driver behind the index's plunge was heavy net selling of electrical and electronics by foreign investors. As Samsung Electronics and SK hynix slid, the selling pressure spread to semiconductor supply chain stocks, triggering a dynamic where breached support levels invited further selling.
On the other hand, the entire market did not fall uniformly. As buying flows shifted toward pharmaceuticals, automobiles, entertainment, cosmetics, and airlines, a wide performance gap opened between semiconductor and non-semiconductor stocks.
Notably, institutional investors bought into a broad range of non-semiconductor sectors. For the time being, market participants need to monitor the intensity of foreign semiconductor selling alongside institutional supply and demand trends across sectors, rather than focusing solely on the headline index.
Market Analyst's Perspective
The U.S. midterm elections and earnings announcements from major tech companies have largely concluded. While shifts in the political landscape are not necessarily decisive variables that will immediately overturn the direction of the AI industry, the market is likely to react sensitively to related news as data center policies are formalized.
In particular, the market is seeking to ascertain whether delayed data center construction will lead to downward revisions in future semiconductor earnings estimates. The recent high volatility in stock prices stems from the market pricing in these possibilities ahead of confirmed earnings changes.
At the center of the data center controversy are costs borne by local communities, such as electricity rates and tax incentives. While adjustment processes—whereby corporations shoulder a larger share of these costs—may delay the schedules of certain projects, this is a far cry from a complete halt in AI infrastructure investment.
Even if some projects face delays, semiconductors remain supported by variables such as supply shortages and long-term contracts. It is worth noting how sharply stock prices moved even before the actual impact on next year's earnings could be verified. While short-term volatility is inevitable as foreign selling persists and support levels break, it is also time to evaluate the divergence between actual earnings shifts and the magnitude of the stock price declines.
For the time being, it is necessary to watch both the sectors affected by changes in the U.S. congressional alignment and the shifting supply-demand dynamics in heavily beaten-down semiconductor stocks. Among former market leaders, stocks with resilient earnings and cumulative institutional buying will also be worth monitoring as volatility subsides.
Source: Market Analyst's Stock Story (t.me/shmstory)
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