The only analyst to "sell" Korea’s two chip giants: Expectations are so high that the stock price could easily fall.

As the only analyst to simultaneously give SK Hynix and Samsung Electronics a sell rating, the Morningstar analyst said that valuations of Korean chip stocks have reached inexplicable levels, making them highly susceptible to sharp declines triggered by even minor setbacks. Just over a month ago, Morningstar released a bearish report on Korean chip stocks, which initially went largely unnoticed. But as scrutiny over tech giants’ massive spending in artificial intelligence deepens, the report has drawn renewed attention. The research report pointed out that, **although SK Hynix and Samsung benefit from the surge in demand for AI-driven high-bandwidth memory chips, the long-term prospects for such spending are far from certain.** Morningstar equity analyst Jing Jie Yu stated: > The intensity of AI investments by hyperscale cloud service providers is now extremely, extremely high. **We are uneasy about whether this intensity can be sustained.** The Singapore-based analyst noted: > Investor confidence is extremely fragile, extremely tense. When expectations are this high, all drivers and catalysts must be perfectly timed for stock prices to rise further, and disappointment is easy. Last Wednesday, SK Hynix and Samsung shares saw their biggest single-day drop in months. Although the stocks later recovered, the volatility unsettled investors who have heavily bet on Korea’s two major blue chips. Previously, these two stocks helped boost the Kospi Index’s gains by more than 70% so far this year. ## Fragility Under High Expectations, but FOMO Still Prevails Morningstar’s research advises a "risk-avoidance strategy" in this volatile and euphoric market. Jing Jie Yu commented: > At these prices, investors find it hard to justify entering, or easily justify exiting. Before joining Morningstar, Jing Jie Yu worked at Valley Asset Management, Bank of Singapore, and Santa Lucia Asset Management. Currently, Jing Jie Yu is the only analyst simultaneously holding sell ratings for Korea’s two leading chip giants. As the market scrutinizes tech stock valuations ever more closely, his warnings are gaining more attention. **However, overall market sentiment toward AI remains optimistic, and the fear of missing out on a historic technological shift outweighs bubble concerns.** Since Morningstar downgraded ratings in September and October, SK Hynix and Samsung shares have risen over 80% and 20%, respectively. After a 94% surge this year, Samsung trades at a forward P/E ratio of 11, while SK Hynix, up 61% since October, is at just 8 times. By comparison, the major US chipmaker index has a P/E of 27. Risk warning and disclaimer The market entails risk; investments require caution. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions herein suit their particular circumstances. Investments made accordingly are at the user’s own risk.