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- South Korea's red-hot stock rally is losing momentum as the memory-chip boom starts to cool.
- GlobalData.TS Lombard says slowing pricing power could curb Samsung and SK Hynix's gains.
- The firm favors Taiwan and Japan as longer-term AI investment plays.
South Korea's stock market has been one of the world's hottest this year, but analysts at GlobalData.TS Lombard say investors should temper their expectations.
The firm's caution centers on the memory cycle.
Industry titans Samsung Electronics and SK Hynix have benefited from soaring prices caused by supply shortages. But the pace of price increases is easing and expanding Chinese capacity could intensify competition.
In contrast, the research firm highlighted that TSMC and Japanese chip-equipment makers generate more of their growth from advanced manufacturing and process expertise, areas with more lasting growth prospects.
"Roughly 55 — 70% of 2026 revenue growth at Samsung memory, SK Hynix and Micron comes from price, compared with 15 — 25% at TSMC and the Japanese equipment makers," the TS Lombard analysts wrote in a note on Tuesday.
TS Lombard remains positive on AI capital spending overall. The firm holds a neutral view on South Korean equities while favoring Taiwan and Japan as more durable ways to gain exposure to the AI buildout.
The analysts warned that higher US interest rates and a retail-driven leverage unwind in South Korea are also likely to cap further gains — even as demand for artificial intelligence infrastructure and technology remains intact.
Memory-chip manufacturers also have less durable earnings than some other AI supply-chain winners because their profits are more exposed to swings in pricing, the analysts added.
"Scarcity rents fade once the scarcity becomes visible; durable returns come from businesses that compound across successive buildout phases, retain pricing power and expand their addressable markets," they wrote.
On Wednesday, South Korea's benchmark Kospi index closed 0.7% higher after gaining as much as 6%. Index heavyweight Samsung Electronics closed 0.6% higher, while SK Hynix gained as much as 9% to end 0.3% lower.
The Kospi is 28% below its record high set last month, but is still the world's best-performing major equity benchmark this year, having also led gains in 2025.
The analysts said Samsung and SK Hynix shares now "look fair" following the recent correction. Samsung is down 30% from its recent peak, while SK Hynix has fallen about 40%.
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