On July 7, 2026, the Korea Composite Stock Price Index (KOSPI) experienced a dramatic shock. During intraday trading, the index plunged 8.22% to 7,389.22 points, triggering a circuit breaker, and ultimately closed down 4.91% at 7,656.31 points. The spark that ignited this market turmoil was a truly explosive earnings report—Samsung Electronics released its preliminary Q2 results, revealing operating profit soared 1,810% year-over-year to 89.4 trillion KRW (about $58.4 billion), with revenue reaching 171 trillion KRW (about $111.8 billion), both setting new all-time highs.
On the same day, SK Hynix filed a revised prospectus with the U.S. Securities and Exchange Commission, confirming its plan to list on Nasdaq under the ticker "SKHY," with a potential fundraising size of around $27.2 billion. However, this milestone event failed to lift market sentiment—SK Hynix shares tumbled over 6% that day.
Despite record-breaking earnings, the capital markets responded coldly. What industry logic underlies this seemingly paradoxical phenomenon?
Has the Profit Peak for Memory Chips Arrived?
Samsung Electronics’ Q2 operating profit of 89.4 trillion KRW not only far exceeded analysts’ average estimate of 84.2 trillion KRW, but also surpassed the total profits from 2023 to 2025 in a single quarter. Samsung has now set new quarterly profit records for three consecutive quarters.
The main driver behind this growth is robust demand for high-bandwidth memory (HBM) from AI data centers. According to Citi Research, average DRAM prices rose 44% quarter-over-quarter in Q2, while NAND flash prices surged 53%. Market research firm Counterpoint expects the average operating margin for the three memory giants—Samsung, SK Hynix, and Micron—to reach as high as 75% to 80% this quarter.
However, a profit peak is itself a signal worth examining. When a company posts its highest-ever quarterly profit, the market naturally asks: Where does growth go from here? This forms the first layer of the "priced-in good news" logic.
Why Did a Blowout Earnings Report Trigger Heavy Selling?
Samsung’s results didn’t "miss expectations"—rather, the market’s expectations had already run ahead of the numbers. Before the earnings release, Wall Street’s consensus for Samsung’s Q2 operating profit was about 86 trillion KRW, with some brokerages forecasting as high as 90 to 100 trillion KRW. Although the actual figure of 89.4 trillion KRW beat the average estimate, it fell short of the most optimistic projections.
A more critical variable lies in performance bonuses. In May, Samsung reached a compensation agreement with its chip division employees, linking bonuses to operating profit and allocating 10.5% of the semiconductor division’s annual operating profit for special bonuses. Analysts note that if the roughly 20 trillion KRW bonus provision were excluded, Samsung’s operating profit would have easily topped 100 trillion KRW.
This means the market had already priced in the highest possible earnings. Over the past 18 months, Samsung’s share price had climbed more than 158%. When the actual results failed to surpass the most bullish scenarios, profit-taking ensued as the "good news" was fully priced in.
How Foundry Losses Are Dragging Down Samsung’s Valuation
Beneath the stellar performance of the memory business, structural risks are mounting within Samsung. Analysts expect losses in the company’s foundry and logic chip (LSI) segments to widen further this quarter. Part of these losses stem from bonus expenses being allocated proportionally across the semiconductor division, but the deeper issue is that Samsung has yet to close the gap with TSMC in advanced process foundry, and its logic chip business has struggled to achieve stable profitability.
This "fire and ice" business structure makes Samsung’s overall profitability highly dependent on the cyclical boom in memory chips. If the memory cycle turns, losses in foundry and logic chips will weigh even more heavily on group profits. The market’s valuation of Samsung essentially discounts this business imbalance—even with astronomical profits from memory, investors can’t ignore persistent losses in other segments.
Why SK Hynix’s U.S. Listing Didn’t Support Its Stock Price
On the same day Samsung’s earnings were released, SK Hynix filed a revised prospectus with the SEC. The company will list on Nasdaq under the ticker "SKHY," issuing 17,790,000 ordinary shares as American Depositary Shares (ADS), with each ordinary share representing 10 ADS. Based on Monday’s closing price of 2.343 million KRW per ordinary share, the potential fundraising size is about $27.2 billion. Cornerstone investors such as Baillie Gifford, Coatue Management, and the "Situational Awareness" fund have expressed interest in subscribing up to $7 billion worth of ADS.
From a fundamentals perspective, SK Hynix’s growth momentum is even more concentrated than Samsung’s. Over the past 12 months, SK Hynix shares have surged nearly 800% in the Korean market. The company expects 2026 net profit to reach about 22.1 trillion KRW (about $144 billion), with sales of 35.5 trillion KRW (about $231 billion), representing year-over-year growth of 415% and 265%, respectively, compared to 2025.
Yet, even with such strong fundamentals, SK Hynix shares still plunged on July 7. This reveals a deeper market logic: after massive gains in the memory chip sector, any positive news—be it record earnings or a landmark listing—can be seen as a signal for profit-taking. SK Hynix has fallen 11.58% since July, mainly affected by the recent Meta "compute power sell-off" controversy.
How Shifting AI Capex Expectations Are Reshaping Semiconductor Valuations
More important than the earnings themselves are the signals from the upstream supply chain. Meta recently hinted at capping AI capital expenditures, which the market interpreted as an early warning that big tech’s AI infrastructure investment may have peaked. Morgan Stanley’s chief equity strategist Michael Wilson noted that the Philadelphia Semiconductor Index has fallen nearly 12% from its high, with global capital flowing from semiconductor stocks to AI supercomputing giants like Microsoft, Amazon, and Meta.
The core of this rotation is that supercomputing giants have fundamental business support and relative room for catch-up, while valuations for semiconductor equipment and memory chip stocks have already priced in the most optimistic expectations. BlackRock Investment Institute’s Jean Boivin team points out that the AI bubble debate centers not on current valuations, but on whether future earnings can remain extraordinary.
Cloud service providers are expected to allocate 52% of their capital spending to AI memory chips this year, with that figure projected to exceed 70% next year. Is this extreme spending structure sustainable? If the commercialization of AI services fails to keep pace with hardware expansion, today’s lofty profit expectations will face downward pressure. This is the deeper logic behind the profit-taking after Samsung’s earnings—not a lack of confidence in past performance, but diverging views on future sustainability.
Supply-Side Variables Are Building in the Memory Chip Supercycle
Most analysts expect memory chip undersupply to persist at least through 2027. NVIDIA CEO Jensen Huang and OpenAI COO Brad Lightcap have both publicly stated that memory shortages are a key bottleneck for AI development.
But supply-side variables are accumulating. China’s CXMT is rapidly catching up in DRAM technology, posing the biggest competitive threat to Korean manufacturers. Expanding Asian capacity could not only erode market share but also compress industry-wide pricing—memory chips are inherently cyclical, and high margins rely on a tight supply-demand balance.
Meanwhile, Samsung and SK Hynix are launching an unprecedented wave of capacity expansion in memory chips. Global memory capex is expected to reach $110.3 billion in 2026 and $168.5 billion in 2027, up 63% and 53% year-over-year, respectively. Samsung plans to invest 1,000 trillion KRW (about $646 billion) in semiconductors and AI infrastructure over the next decade. SK Hynix aims to double wafer capacity in five years and triple it by 2034.
While expansion confirms strong demand, large-scale capacity releases mean the supply curve will inevitably shift right. When new capacity comes online in bulk, pricing power could shift. This is another fundamental reason for the market’s cautious stance on the memory sector.
What Signal Are Top Investors Sending With Contrarian Buying?
Amid panic selling, one notable signal comes from top investors. According to Mirae Asset Securities data, on July 7, investors ranked in the top 1% by one-month return were aggressively buying Samsung Electronics and SK Hynix. As of 1:31 p.m. local time, Samsung Electronics was down 9.12% to 289,000 KRW, and SK Hynix was down 8.19% to 2.151 million KRW.
Analysts attribute the sell-off to profit-taking—expectations for earnings had already been raised substantially. Top investors, however, see the pullback as a buying opportunity in AI memory semiconductors. This contrarian move suggests that despite short-term pressure on sentiment, some institutional investors believe the long-term fundamentals for memory chips remain intact.
However, contrarian buying alone doesn’t resolve market disagreements. After Samsung’s earnings release, selling pressure in Korea was concentrated in AI memory and semiconductor stocks, but capital didn’t exit the market entirely—it rotated into financials, consumer, and some defensive blue chips for safety. KB Financial and Shinhan Financial closed up 1.35% and 0.84%, respectively. This rotation shows the market isn’t broadly bearish on Korean assets, but is rebalancing structurally—shifting from fully priced semiconductor stocks to more reasonably valued sectors with less exposure to the AI memory cycle.
Conclusion
Samsung Electronics posted a record operating profit of 89.4 trillion KRW in Q2 2026, but this triggered a stock price plunge and a KOSPI circuit breaker. Beneath the "priced-in good news" surface lie three overlapping factors: market expectations had already outpaced results, structural losses in the foundry business are dragging on overall valuation, and dual concerns over the sustainability of AI capital spending and supply cycle volatility. SK Hynix is set to debut on Nasdaq, but even with stronger growth momentum and a more focused business model, it couldn’t escape the sell-off. As the memory chip supercycle potentially nears a cyclical peak, market divisions are widening. Yet, contrarian buying by top investors reminds us: after extreme sentiment unwinds, the true strength of fundamentals will ultimately determine the long-term direction.
FAQ
Q: What were Samsung Electronics’ Q2 results?
Samsung Electronics’ preliminary results for Q2 2026 show sales of about 171 trillion KRW (approximately $111.8 billion), up 129.3% year-over-year; operating profit was about 89.4 trillion KRW (about $58.4 billion), up 1,810.2% year-over-year. This figure beat the average analyst estimate of 84.2 trillion KRW.
Q: If Samsung’s results were so strong, why did the stock plunge?
The core reason is "buy the rumor, sell the news." Over the past 18 months, Samsung’s share price had already climbed more than 158%, with the most optimistic earnings expectations priced in ahead of time. When the actual figure of 89.4 trillion KRW failed to reach some brokerages’ bullish forecasts of 90 to 100 trillion KRW, profit-taking accelerated.
Q: When will SK Hynix list on Nasdaq?
SK Hynix plans to begin trading on Nasdaq on July 10, 2026 (Friday) under the ticker "SKHY." The company will issue 17,790,000 ordinary shares as American Depositary Shares (ADS), with a potential fundraising size of about $27.2 billion.
Q: How long can the memory chip supercycle last?
Most analysts expect memory chip undersupply to continue at least through 2027. However, supply-side variables are building—China’s CXMT is catching up in DRAM technology, and Samsung and SK Hynix’s large-scale expansion plans could shift the supply-demand balance in the medium to long term.
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