The memory semiconductor stocks that set global markets ablaze in the first half of the year have recently plunged, stoking investor anxiety. Yet brokerages in South Korea and abroad are increasingly arguing that now is the time to buy. Their contention: a synthesis of technical indicators and historical cycle analysis suggests the industry peak is still far off, and the recent drawdown has entered a meaningful buying zone.
According to the financial investment industry on July 10, Hanwha Investment & Securities issued a report assessing that Micron Technology and SanDisk have entered historically significant buying territory after falling approximately 30% from their recent highs. The Philadelphia Semiconductor Index (SOX) has dropped 15% from its peak during the recent correction, while Nvidia and Broadcom are down about 20%, and memory names Micron and SanDisk have recorded declines of around 30%.
The report analyzed that, based on historical precedent, unless the U.S. stock market enters a full-fledged bear market, the maximum drawdown for the semiconductor sector has often been capped at -20% for the index and -30% for individual stocks. Excluding instances where the broader market entered a bear phase—such as the COVID-19 shock in 2020, Federal Reserve tightening in 2022, and the tariff shock in 2025—further downside for the semiconductor sector and memory stocks over the past decade has been limited.
Technical indicators also suggest a potential rebound. The SOX index's Relative Strength Index (RSI) has approached the oversold threshold of 30, and the stochastic indicator has also entered oversold territory. For Micron, a bellwether memory stock, both indicators have fallen into oversold zones, increasing the likelihood of a short-term bounce, according to the analysis.
RSI is a technical indicator that quantifies how rapidly a stock price has risen or fallen over a given period. Readings above 70 are generally interpreted as "overbought," while readings below 30 signal "oversold." The stochastic indicator shows where the current price sits relative to the high-low range over a recent period, with the 0-20 zone considered oversold and 80-100 overbought. While both tools measure short-term supply-demand dynamics and investor sentiment rather than corporate fundamentals or earnings, they are commonly used as reference points for gauging short-term buying timing.
Hanwha Investment & Securities particularly stressed that the recent compression in memory semiconductor companies' price-to-earnings ratios should not be interpreted as a undervaluation signal. This is because upward revisions to earnings-per-share estimates have outpaced the stock price declines, indicating the actual earnings cycle continues to improve. Accordingly, the firm expects a strategy of "buying at high PER, selling at low PER"—based on earnings estimates from one year ago—to remain effective for the time being.
"Now is the time to increase semiconductor exposure, with memory (including storage) semiconductor stock prices having plunged 30% from their highs and non-memory and semiconductor indices down nearly 20%," said Han Sang-hee, an analyst at Hanwha Investment & Securities. "Based on estimates from one year ago, at least one more quarter remains for a cycle where buying at high PER and selling at low PER can play out."
KB Securities offered a similar view. The firm diagnosed the core cause of the recent semiconductor correction as excessive concern over "slowing earnings growth," pointing out that in an environment of surging profits like the current one, decelerating growth rates are a natural phenomenon due to base effects and should not be interpreted as a cycle peak signal.
Historical cases involving SK Hynix were cited as evidence. In both 2013 and 2017, EPS growth rates peaked first, but actual stock price peaks formed roughly 10 months and 9 months later, respectively. This occurred because the absolute level of earnings continued to increase even as the growth rate decelerated, sustaining the stock price rally.
KB Securities emphasized that the more important metric in the current market is profitability, not earnings growth rates. Based on current consensus estimates, semiconductor companies' profit margins are expected to improve through the fourth quarter of this year, making it difficult to conclude that the cycle has already passed its peak.
"As we move past early July, it's time to examine whether the stock price correction can be viewed as an opportunity to increase exposure," said Lee Eun-taek, an analyst at KB Securities. "Even if EPS continues to grow going forward, should stocks fall simply because the growth rate fails to exceed 800%? That seems unlikely."
However, voices cautioning against premature optimism are hardly insignificant. KB Securities itself added that the key to future investment decisions will be whether profit margins actually improve, and since margin estimates change frequently, investors should closely monitor revisions to forward estimates.
Some brokerages believe that even after factoring in industry expectations, current stock prices are at stretched levels. BNK Investment & Securities recently issued a target price of 1.85 million won (approximately $1,230) for SK Hynix—below the current share price—suggesting limited additional upside.
The debate is also heated overseas. According to Business Insider, Jose Torres, senior economist at online brokerage Interactive Brokers, interpreted the recent memory stock plunge as a warning signal from the market. He argued that the profit surge at companies like Micron and Samsung Electronics should be read as a caution about overinvestment in AI infrastructure buildout. He also noted that growing complaints from consumer electronics companies like Apple about excessively high memory chip prices have caused investors to start paying attention to valuation burdens.
On the other hand, Luke Lango, technology strategist at Navellier & Associates, countered in a client note that the firm "maintains a bullish stance on memory-related stocks," arguing that the technical and fundamental environment remains "demonstrably excellent by the numbers."
Looking at the drawdowns of major memory semiconductor stocks from their recent highs, Western Digital has fallen the most at 31%, followed by SK Hynix at 30%, SanDisk at 27%, Samsung Electronics at 26%, Seagate Technology at 25%, and Micron at 24%. The Roundhill Memory ETF, the first ETF focused on memory, has also dropped 24% from its peak, entering bear market territory.
The first-half rally in memory stocks was nothing short of ferocious. SanDisk topped the S&P 500 constituents in year-to-date gains, skyrocketing 858% in the first half alone, while the Roundhill Memory ETF surged 194% through the end of June. The SOX index posted a record 18 consecutive trading days of gains in April and rose 88% in the second quarter alone. Market opinion is now divided on whether the sharp selloff following this explosive rally is merely a pause for breath or a signal of a trend reversal.
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