South Korean chip stocks drop for five consecutive days; analysts say the market doubts the sustainability of profits

E.T. Lee and D.E. Lee of KB Securities stated that although the artificial intelligence boom has kept profit expectations for semiconductor companies high, the decline in South Korean chip stocks may partly reflect investors' doubts about the sustainability of these earnings. Samsung Electronics and SK hynix share prices have fallen for five consecutive trading days. The two analysts wrote in their report, "Investors still seem to view semiconductors as a cyclical industry and remain skeptical about the sector's ability to continuously generate profits." They noted that while supply bottlenecks can lead to soaring profits during boom periods, the eventual easing of these bottlenecks may result in inventory surpluses and overinvestment. They also added that similar patterns have been seen post-pandemic in industries such as diagnostic test kits, masks, toilet paper, and container shipping.