Hanwha Investment & Securities stated in a report that Micron and SanDisk have entered historically significant buying zones after falling approximately 30% from recent peaks. The Philadelphia Semiconductor Index dropped 15% from its high due to recent corrections, while Nvidia and Broadcom declined around 20%. KB Securities attributed the semiconductor sector adjustment to excessive concerns over profit growth rate slowdown, noting that profit margins are projected to improve through the fourth quarter of this year according to current consensus estimates. Hanwha Investment & Securities analyzed that outside full market bear phases, the semiconductor sector's maximum drawdown historically ended around -20% for indices and -30% for individual stocks based on past cases including the COVID-19 shock in 2020, Federal Reserve tightening in 2022, and tariff shock in 2025.
Philadelphia Semiconductor Index Records 15% Decline from Peak
The Philadelphia Semiconductor Index fell 15% from its recent high, according to data cited by Hanwha Investment & Securities. Nvidia and Broadcom recorded declines of approximately 20%, while memory companies Micron and SanDisk posted losses around 30%. Hanwha Investment & Securities' report stated that over the past 10 years, excluding cases where the entire market entered a bear phase such as the COVID-19 shock in 2020, Federal Reserve tightening in 2022, and tariff shock in 2025, additional downside for the semiconductor sector and memory stocks was limited. The report concluded that the maximum drawdown for the semiconductor sector typically concluded around -20% on an index basis and -30% for individual stocks when the U.S. stock market did not enter a full bear market.
Technical Indicators Show Oversold Conditions in Memory Stocks
Technical indicators suggest rebound potential for memory semiconductor stocks. The Philadelphia Semiconductor Index's Relative Strength Index (RSI) approached the oversold threshold of 30, while the Stochastic indicator entered oversold territory. Micron's RSI and Stochastic indicators both moved into oversold zones, raising the likelihood of a short-term rebound according to the analysis. RSI quantifies how quickly a stock price has risen or fallen over a certain period, with readings above 70 generally interpreted as overbought and below 30 as oversold. The Stochastic indicator measures where the current price stands relative to the highest and lowest prices over a recent period, with the 0-20 range considered oversold and 80-100 considered overbought.
Hanwha Investment & Securities Cites Historical Drawdown Patterns
Hanwha Investment & Securities stated that the recent decline in memory semiconductor companies' price-to-earnings ratios should not be interpreted as an undervaluation signal. The report explained that this resulted from upward revisions to earnings per share (EPS) estimates exceeding the stock price decline, indicating that the actual profit cycle is still improving. Han Sang-hee, a researcher at Hanwha Investment & Securities, stated that now is the time to increase semiconductor exposure, with memory semiconductor stock prices down 30% from peaks and non-memory and semiconductor indices falling nearly 20%. Han added that based on estimates from one year ago, the period for buying at high PER and selling at low PER has at least one more quarter remaining.
KB Securities Emphasizes Profit Margin Trajectory Over Growth Rate
KB Securities diagnosed the core cause of the recent semiconductor correction as excessive concerns over profit growth rate slowdown. The firm pointed out that when profits surge as they have recently, a deceleration in growth rate due to base effects is a natural phenomenon and should not be interpreted as a signal that the industry cycle has peaked. KB Securities presented past SK Hynix cases as evidence: in both 2013 and 2017, EPS growth rates peaked first, but actual stock price peaks formed approximately 10 months and 9 months later, respectively. Stock prices continued rising even as EPS growth rates slowed because the absolute level of profits kept increasing. KB Securities emphasized that the more important indicator in the current market is profit margin rather than profit growth rate. Based on current consensus, semiconductor companies' profit margins are expected to improve through the fourth quarter of this year, making it difficult to conclude that the industry cycle has already passed its peak.
SK Hynix Historical Cases Show Stock Peak Lag After EPS Growth Peak
KB Securities referenced historical SK Hynix data showing that stock price peaks occurred significantly after EPS growth rate peaks. In 2013 and 2017, SK Hynix's stock prices reached their highs approximately 10 months and 9 months after EPS growth rates peaked, respectively. The firm stated that profit margin improvement will be the key factor for future investment decisions, noting that profit margins change frequently and investors should pay attention to changes in future estimates. Some securities firms view current stock prices as burdensome even when reflecting industry expectations. BNK Investment & Securities recently set a target price for SK Hynix at 1.85 million won, below the current stock price, indicating limited additional upside potential. Lee Eun-taek, a researcher at KB Securities, stated that after early July, it is time to consider whether the stock price correction can be viewed as an opportunity to increase exposure, analyzing that even if EPS continues to grow, the likelihood of stock prices having to fall simply because the growth rate does not exceed 800% is low.
FAQ
What caused the recent decline in memory semiconductor stocks?
The Philadelphia Semiconductor Index fell 15% from its recent high, with Nvidia and Broadcom declining approximately 20% and memory companies Micron and SanDisk dropping around 30%. KB Securities attributed the correction to excessive concerns over profit growth rate slowdown, though the firm noted that profit margins are projected to improve through the fourth quarter of this year according to current consensus estimates.
Why do analysts view this as a buying opportunity for memory stocks?
Hanwha Investment & Securities stated that Micron and SanDisk entered historically significant buying zones after falling approximately 30% from recent peaks. The firm's analysis of past cases showed that outside full market bear phases, the semiconductor sector's maximum drawdown typically concluded around -20% for indices and -30% for individual stocks. Technical indicators including RSI and Stochastic also showed oversold conditions for the Philadelphia Semiconductor Index and Micron.
How do technical indicators support the case for memory semiconductor stocks?
The Philadelphia Semiconductor Index's RSI approached the oversold threshold of 30, while the Stochastic indicator entered oversold territory. Micron's RSI and Stochastic indicators both moved into oversold zones. RSI measures how quickly a stock price has risen or fallen, with readings below 30 generally considered oversold. The Stochastic indicator measures current price position relative to recent highs and lows, with the 0-20 range viewed as oversold.
