HSBC: Samsung Electronics Priced as 'No AI,' Implies Long-Term Earnings Have Fallen to 2024, Most Severe Selling Pressure Nearing End

BlockBeats News, August 4th. In its latest report, HSBC did not use the traditional P/E ratio valuation but chose to reverse-engineer the long-term earnings expectations implied by the current Samsung Electronics stock price. Based on the next three years' consensus earnings, a Monte Carlo simulation was run 100,000 times to filter out a 15-year earnings trajectory that matches the current stock price. The conclusion indicates that the market has truly revised down the long-term AI earnings outlook for Korean tech stocks.

Samsung Electronics has become the most extreme case, with the stock price plummeting by about 25% from its early June peak. The market-implied earnings cycle has shortened from about 3.5 years to 2.5 years, and the implied trending EPS relative to the 2024 level has plummeted from about 2 times to just 0.8 times, nearly erasing the long-term AI premium. The implied EPS compound annual growth rate from the third year to the ninth year has further decreased from about -15% to -35%, hitting a historic low. The market not only believes that the current AI boom is unsustainable but also thinks that Samsung's profitability after the cycle ends may not even surpass the 2024 level before the AI wave began.

SK Hynix's adjustment is even more dramatic, with the stock price plunging by 37% since its peak on June 25th. The implied earnings cycle has dropped from about 6 years to 2.7 years, and the long-term trending earnings have fallen from about 6 times in 2024 to about 2 times. HSBC believes that this decline is already "excessively pessimistic." In contrast, TSMC's implied earnings cycle still remains at about 7.4 years, with long-term trending earnings at about 2.3 times in 2024. The market still acknowledges the profit improvement that AI can bring across the cycle, and the pricing difference between Korean memory stocks and TSMC has become the most distinctive feature of this round of correction.

On the funding side, foreign investors have sold a net total of around $150 billion of Samsung, Hynix, and TSMC stocks since the beginning of this year, including about $60 billion since June. The scale of ETFs with 2x leverage that magnify volatility in a single stock has decreased from around $37 billion at the end of June to $12 billion, with a noticeable decrease in trading volume share on days of intense stock volatility.

HSBC believes that the most disruptive mechanistic selling pressure is diminishing, and the current core issue is no longer the question of whether there is a demand for AI but whether stock prices have compressed the AI cycle too pessimistically.