Samsung posts a record-high earnings report—yet sends KOSPI tumbling: Where does the memory chip super cycle stand?

On July 7, 2026, the Korea Composite Stock Price Index (KOSPI) experienced a severe bout of turbulence. During the trading session, it once plunged 8.22% to 7,389.22 points, triggering a circuit-breaker mechanism, and ultimately closed down 4.91% at 7,656.31 points. The fuse behind this storm was precisely a “thrilling” earnings report: Samsung Electronics’ preliminary second-quarter results released that day showed operating profit surged 1,810% year on year to 89.4 trillion won (approximately $58.4 billion), while revenue reached 171 trillion won (approximately $111.8 billion)—both hitting record highs.

On the same day, SK Hynix filed an amended prospectus with the U.S. Securities and Exchange Commission, confirming it would list on Nasdaq under the ticker “SKHY,” with a potential fundraising size of about $27.2 billion. However, this milestone event failed to lift market sentiment—SK Hynix’s stock price fell by more than 6% that day.

Record-breaking performance, yet the capital markets delivered a cold response. What industry logic lies behind this seemingly contradictory phenomenon?

Has the profit peak for memory chips already arrived?

Samsung Electronics’ second-quarter operating profit of 89.4 trillion won not only far exceeded analysts’ average expectation of 84.2 trillion won, but also, on a single-quarter basis, surpassed the total profits of the three years from 2023 to 2025. Samsung has refreshed its single-quarter profit record for three consecutive quarters.

The key driver behind this growth is strong demand for High Bandwidth Memory (HBM) from AI data centers. According to data from Citigroup Research, in the second quarter the average selling price of DRAM rose 44% quarter over quarter, while the average price increase for NAND flash was even higher at 53%. Counterpoint, a market research institution, expects that the average operating profit margins of the three major memory companies—Samsung, SK Hynix, and Micron—will reach as high as 75% to 80% in the quarter.

However, a profit peak in itself is a signal worth scrutinizing. When a company’s quarterly profit reaches an all-time high, the market naturally asks: where is the room for growth in the next quarter? This forms the first layer of the “good news is already priced in” logic.

Why did a better-than-expected earnings report trigger a large-scale sell-off instead?

Samsung Electronics’ results were not “below expectations,” but rather the market expectations had already run far ahead of the actual numbers. Before the earnings release, Wall Street’s consensus estimate for Samsung’s second-quarter operating profit was about 86 trillion won, and some brokerages even forecast as high as 90 trillion to 100 trillion won. When the actual figure of 89.4 trillion won came in—surpassing the average expectation—it still failed to reach the upper bound projected by the more optimistic analysts.

A more crucial variable lies in performance bonuses. In May, Samsung reached a compensation agreement with employees in the chip division, tying performance bonuses to operating profit and allocating 10.5% of the semiconductor division’s annual operating profit to special bonuses. Analysts pointed out that if this roughly 20 trillion won bonus provision were excluded, Samsung’s actual operating profit could easily have exceeded 100 trillion won.

This means the market had already fully incorporated the highest performance expectations into the stock price. In the past 18 months, Samsung Electronics’ stock price has risen by more than 158%. When the actual data failed to surpass even the most optimistic scenario, the “good news is already priced in” sell-off followed.

How do losses in the foundry business erode Samsung’s overall valuation?

Against the backdrop of the memory business shining, structural concerns within Samsung are accumulating. Analysts expect that losses from the company’s foundry and logic chip (LSI) business may further expand in this quarter. Some of these losses come from bonus expenses being allocated proportionally into the semiconductor division’s overall costs; but a deeper issue remains: Samsung’s gap in advanced process foundry with TSMC has not narrowed, and the logic chip business has long been unable to achieve stable profitability.

This “ice and fire” business mix makes Samsung’s overall earnings highly dependent on the cyclical boom in memory chips. Once the memory cycle turns, losses from the foundry and logic chip businesses will weigh more heavily on the group’s profits. The market’s valuation of Samsung, in essence, discounts the imbalance in this business structure—even if the memory business generates profits on an astronomical scale, investors still cannot ignore the fact that other business lines continue to bleed.

Why didn’t SK Hynix’s listing in the U.S. become a stock-price support?

On the very same day as Samsung’s earnings were released, SK Hynix submitted an amended prospectus to the SEC. The company plans to list on Nasdaq under the ticker “SKHY,” issuing American Depositary Shares (ADS) corresponding to 17,790,000 shares of common stock, with each common share representing 10 ADS. Based on the Monday closing price of 2.343 million won for a South Korean common share, the potential fundraising size is about $27.2 billion. For cornerstone investors, institutions such as Baillie Gifford, Coatue Capital Management, and the “situation awareness” fund intend to subscribe for up to a combined total of $7 billion worth of ADS.

From a fundamental perspective, SK Hynix’s growth momentum is even more concentrated than Samsung’s. Over the past 12 months, SK Hynix’s stock price has risen by nearly 800%, propelling it across the domestic Korean market. The company expects net profit for 2026 to reach approximately 221 trillion won (about $144 billion), with sales of 355 trillion won (about $231 billion), growing 415% and 265% respectively compared with 2025.

However, even with such strong fundamentals support, SK Hynix on July 7 still failed to avoid a sharp drop in its stock price. This reveals a deeper market logic: with the memory chip sector having already accumulated massive gains, any positive news—whether a record-breaking earnings report or a milestone listing—may be interpreted by the market as a signal of phased profit realization. Since July, SK Hynix has fallen 11.58%, mainly due to the earlier Meta “selling compute power” controversy.

How do changes in AI capital expenditure expectations reshape semiconductor valuation logic?

More noteworthy than the earnings themselves are the signals released from the upstream of the industry chain. Meta recently hinted that it will set a cap on AI capital expenditure, which the market interpreted as an early warning that AI infrastructure investment by tech giants may be nearing a peak. Morgan Stanley’s Chief Equity Strategist Michael Wilson pointed out that the Philadelphia Semiconductor Index has already dropped nearly 12% from its high, and global capital is shifting from the semiconductor sector to AI supercomputing giants such as Microsoft, Amazon, and Meta.

The core of this rotation logic is that supercomputing giants have strong underlying business support and thus have relatively more room to catch up on gains; meanwhile, the valuation of semiconductor equipment and memory chip stocks has already priced in the most optimistic expectations. Jean Boivin’s team at BlackRock Investment Institute noted that the core of the debate over an AI bubble is not current valuation, but whether future earnings can sustain extraordinary levels.

Cloud service providers’ share of capital expenditure allocated to AI memory chips is expected to reach 52% this year, and is projected to exceed 70% next year. Is this extreme spending structure sustainable? If the pace of monetizing AI services cannot keep up with the expansion of hardware, the current very high earnings expectations will face downward revision pressure. This is the deeper logic behind the market’s decision to take profits after Samsung’s earnings came out—not because it is not looking at the past, but because there is disagreement about the future’s sustainability.

Supply variables in the memory chip super cycle are accumulating

Analysts generally expect the oversupply shortage of memory chips to last at least until 2027. Nvidia CEO Huang Renxun and OpenAI COO Brad Lightcap have both publicly said that memory shortages are a key bottleneck for AI development.

But supply-side variables are building up. The catch-up speed of China’s CXMT (ChangXin Memory Technologies) in DRAM technology is currently the biggest competitive variable for Korean manufacturers. Asia’s capacity expansion may not only erode market share, but also compress pricing power across the entire industry—memory chips are inherently a highly cyclical industry, and high profit margins depend heavily on a tight balance between supply and demand.

At the same time, Samsung and SK Hynix are kicking off an unprecedented wave of capacity expansion in the memory chip sector. Global memory capital expenditures are expected to reach $110.3 billion in 2026 and $168.5 billion in 2027, up 63% and 53% respectively. Samsung Group plans to spend 1,000 trillion won (approximately $646 billion) on semiconductors and AI infrastructure over the next decade. SK Hynix plans to double wafer capacity within five years and expand capacity to three times by 2034.

Capacity expansion itself confirms strong demand, but large-scale release of capacity also means the supply curve will ultimately shift to the right. When incremental capacity is concentrated and deployed, the balance of pricing power could reverse. This is another fundamental reason why the market remains cautious about the memory segment.

What signals are released by top investors taking the opposite action?

Amid the market’s panic sell-off, a signal worth paying attention to comes from top investors. According to data from Mirae Asset Securities, on July 7, investors ranked in the top 1% by one-month return made large purchases of Samsung Electronics and SK Hynix. As of 1:31 PM local time, Samsung Electronics was down 9.12% to 28.9 million won, while SK Hynix was down 8.19% to 2.151 million won.

Analysts attributed the sell-off to profit-taking—market expectations for earnings had already been raised significantly earlier. Top investors, however, viewed the drop as a buying opportunity in the AI memory semiconductor space. This opposite action indicates that although near-term sentiment remains under pressure, some institutional investors still believe the long-term fundamentals of memory chips have not fundamentally reversed.

However, the existence of opposite action cannot dissolve market divergence by itself. After Samsung’s earnings were released, selling pressure in the Korean market concentrated on AI memory and the semiconductor supply chain, but capital did not fully withdraw from the stock market; instead, it rotated into financials, consumer sectors, and some defensive large-cap stocks for hedging. Kookmin Bank and Shinhan Financial each rose 1.35% and 0.84%, respectively. This capital rotation suggests that the market is not systematically bearish on Korean assets; rather, it is conducting structural sector rebalancing—from the already fully priced semiconductor sector to areas with relatively more reasonable valuations and lower correlation with the AI memory cycle.

Summary

Samsung Electronics’ second-quarter 2026 operating profit of 89.4 trillion won set a historical record, yet triggered a stock-price plunge and a KOSPI index circuit breaker. Beneath the appearance of “good news is already priced in,” three layers of logic overlap: market expectations had already run ahead of the results, structural losses in the company’s foundry business dragged down the overall valuation, and there are dual concerns about the sustainability of AI capital expenditure and uncertainties in the supply cycle variables. SK Hynix is about to list on Nasdaq, but even with stronger growth momentum and a more focused business structure, it still could not escape this round of sell-off. Whether the memory chip super cycle is nearing a phase peak is a point of growing market disagreement. But the contrarian buying by top investors also reminds us: after extreme sentiment has been released, the true quality of fundamentals is the key variable determining the long-term direction.

FAQ

Q: What were Samsung Electronics’ exact second-quarter earnings?

Samsung Electronics’ preliminary second-quarter 2026 results show sales of approximately 171 trillion won (about $111.8 billion), up 129.3% year on year; operating profit of approximately 89.4 trillion won (about $58.4 billion), up 1,810.2% year on year. This figure exceeded analysts’ average expectation of 84.2 trillion won.

Q: If Samsung’s performance is so strong, why did the stock price plunge instead?

The core reason is “buy the expectation, sell the reality.” Over the previous 18 months, Samsung Electronics’ stock price has accumulated gains of more than 158%, and the market had already priced in the most optimistic earnings expectations in advance. When the actual figure of 89.4 trillion won failed to reach some brokerages’ optimistic forecasts of 90 trillion to 100 trillion won, profit-taking sell orders surged.

Q: When will SK Hynix list on Nasdaq?

SK Hynix plans to begin trading on Nasdaq on Friday, July 10, 2026, under the ticker “SKHY.” It will issue American Depositary Shares (ADS) corresponding to 17,790,000 common shares, with a potential fundraising size of about $27.2 billion.

Q: How long can the memory chip super cycle continue?

Analysts generally expect the supply shortage of memory chips to last at least until 2027. But supply-side variables are accumulating—China’s CXMT catch-up in DRAM technology, and Samsung and SK Hynix’s large-scale capacity expansion plans could both change the supply-demand balance over the medium to long term.

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