Quick Read
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Micron (MU), iShares MSCI South Korea ETF (EWY), and Taiwan Semiconductor (TSM) are key memory and semiconductor plays: SK Hynix and Samsung dominate high-performance memory chips in South Korea, driving the iShares MSCI South Korea ETF up 101% year to date.
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South Korean memory chip makers and the broader market ETF tracking them offer better value than U.S. competitors as the AI boom drives overwhelming demand for DRAM and NAND storage chips, though Chaebol corporate complexity has historically justified a valuation discount that may matter less given the critical AI infrastructure opportunity.
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Just over three years ago, you wouldn’t have thought that the South Korean stock market would be such a source of profound strength as the AI boom took off and things like storage and memory chips started seeing demand overwhelm supply. If anything, DRAM, NAND, and other pieces of hardware are supposed to be commodities, rather than a highly differentiated product that has a source of a moat.
Any way you look at it, though, memory and storage chips are a hot commodity, to say the least. And given the limited global availability, just two industry giants in SK Hynix and Samsung, the former of which you may never have heard of until recently due to its dominant position in the high-performance memory (HPM) chip world, are helping lead South Korea’s stock market to its parabolic rise, which is showing no signs of slowing down.
In a prior piece, I highlighted that much of Wall Street was still upbeat about the memory and storage plays, including America’s Micron (NASDAQ:MU). What’s more, though, is that South Korean competitors stood out as relatively cheaper for investors who wanted a bit of a discount to bet in the same key bottleneck of the AI boom. Undoubtedly, call it the “South Korean” discount, if you will, but a name like SK Hynix still stands out as a way to get a bit more value.
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Of course, you’ll have to go to the overseas market to gain exposure to the likes of an SK Hynix or a Samsung. An easier way is to bet on an ETF that tracks the South Korean market.
The South Korean stock market is the new momentum market in town
You’re getting a double dose of memory and storage exposure (with the one-two combo that is SK Hynix and Samsung) in addition to a wide range of other companies. Apart from the two memory titans, something like the iShares MSCI South Korea ETF (NYSEARCA:EWY) also has exposure to industrial names that stand to greatly benefit from the rise of AI.
From LG Electronics and its role in supplying components to a shift towards physical AI and robotics to vehicle makers at Hyundai Motor, there’s a lot of excitement under the hood of the South Korean market. Of course, nothing quite moves the needle like SK Hynix or Samsung, though, especially as analysts keep raising the bar on their price targets.
At the start of the year, I thought that the gains would be harder to come by in the South Korean market. As we approach the midpoint of the year, the iShares MSCI South Korea ETF now finds itself up over 101% year to date.
What to know about South Korea’s Chaebol companies
Of course, the “Chaebol” companies, as they’re often referred to, might justify the “Korea discount,” which is in reference to the complex family-controlled corporate structure. Indeed, the South Korean market is a vastly different landscape that many of us may be a bit less familiar with.
In essence, Korea’s top firms are a tangled web compared to some of the more streamlined American Magnificent Seven giants we all know and love. While I do think such a discount is deserved, I’d argue that given the exposure to the AI revolution in the memory and storage department, the Chaebol discount should matter less.
I don’t know about you, but the geopolitical uncertainty with a name like Taiwan Semiconductor (NYSE:TSM), I think, warrants a fatter discount, given how bad things could get if China were to invade, than the added complexity with Chaebol companies that are represented well with any South Korean market ETF.
The bottom line
As for the Chaebol-heavy EWY ETF itself, it’s up a bit more than 31% in the past month (or about 5x the past-month return of the S&P 500), and it’s unclear what the next big move will be. Personally, I’d rather watch the action from the sidelines than step in as a buyer. That is, unless, of course, you’re actively looking for more memory exposure as the AI boom plays out.
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
