Samsung Electronics and SK Hynix stocks plunged 9.06% and 14.57% respectively on May 3 following Meta's announcement of its cloud infrastructure service 'Meta Compute,' erasing 432 trillion won in combined market capitalization. The sharp declines were triggered by investor concerns over potential semiconductor supply oversupply after Meta revealed plans to sell excess computing resources from its AI data centers to external customers. However, securities analysts characterized the market reaction as excessive, noting that memory semiconductor supply continues to lag demand and both companies maintain robust earnings forecasts, with combined Q2 revenue projected at 256 trillion won.
Samsung Electronics and SK Hynix Record Largest Single-Day Drops Since 2008
According to the Korea Exchange, Samsung Electronics fell 9.06% to break below the 300,000 won level, while SK Hynix dropped 14.57% to the 2.1 million won range. SK Hynix's decline marked its largest single-day drop since November 20, 2008, approximately 17 years and 7 months prior, during the global financial crisis. Compared to their recent peaks, Samsung Electronics and SK Hynix stocks have fallen 23% and 26% respectively.
Other Asian semiconductor stocks also experienced sharp declines. Japan's Kioxia Holdings fell 13.47% and Tokyo Electron dropped 7.44%. Chinese semiconductor companies listed on the Hong Kong Stock Exchange, including SMIC (-10.07%) and Hua Hong Grace Semiconductor (-13.52%), also recorded significant losses.
Meta Announces Meta Compute Cloud Service
On May 1, Meta, the parent company of Facebook and Instagram, announced its entry into the AI cloud infrastructure business. The company is preparing a cloud service called 'Meta Compute' that will sell excess computing resources from its proprietary data centers to external customers. The announcement indicated that Meta, which has been investing heavily in AI data center expansion, would now operate as a supplier selling surplus data center resources. This development raised market concerns about semiconductor supply shortages.
Analysts Dismiss Supply Oversupply Concerns
Securities analysts rejected the market's interpretation as excessive concern. Lee Jae-won, a researcher at Yuanta Securities, stated that "Meta Compute was first highlighted through media reports, but it is actually a strategy that has been in progress for several months." Lee noted that "Meta already established a data center-dedicated organization in January, and CEO Mark Zuckerberg mentioned the possibility of entering the cloud business at the shareholder meeting in May."
Lee added that "the essence of Meta Compute is not that computing capacity is excessive, but that AI computing infrastructure is being converted into sellable cloud assets. Meta's strategy is closer to making money from AI infrastructure and reinvesting it in AI infrastructure, rather than reducing investment."
Lee Dong-yeon, a researcher at Korea Investment Securities, stated that "it is unreasonable to interpret that Meta will immediately reduce Capex investment just because it has launched an infrastructure rental business." Lee cited Meta's recent signing of a 1.6GW computing contract with Crusoe and the company's upward adjustment of its annual Capex guidance by $10 billion during its Q1 earnings announcement in May, while mentioning the possibility of entering the AI infrastructure business.
Securities Firms Raise Target Prices for Samsung and SK Hynix
Despite the Meta issue, securities firms raised target prices for Samsung Electronics and SK Hynix. Korea Investment Securities raised Samsung Electronics' target price to 590,000 won, while DB Securities set it at 360,000 won.
KB Securities and Sangsangin Securities raised SK Hynix's target price to 4.2 million won and 3.8 million won respectively. NH Investment Securities and IBK Securities previously set target prices at 4.1 million won and 4 million won respectively.
Q2 Earnings Forecast 256 Trillion Won Combined Revenue
The strong earnings performance of both companies underpins the target price increases. According to securities industry consensus, Samsung Electronics' Q2 revenue is projected to reach 173 trillion won with operating profit of 85 trillion won. SK Hynix is expected to post record-breaking Q2 results with revenue of 83 trillion won and operating profit of 64 trillion won.
Jo A-in, a researcher at Samsung Securities, stated that "the recent volatility in semiconductor stocks is closer to a process where investor sentiment is shaken due to conflicting interpretations of the same phenomenon, rather than new negative factors. In the past, leading stocks have often continued their upward trend based on earnings while repeating corrections of 10-20%."
FAQ
What caused Samsung Electronics and SK Hynix stocks to drop on May 3?
The stocks fell 9.06% and 14.57% respectively following Meta's announcement of its 'Meta Compute' cloud service on May 1, which raised investor concerns about potential semiconductor supply oversupply as Meta plans to sell excess computing resources from its AI data centers.
What are the Q2 earnings forecasts for Samsung Electronics and SK Hynix?
According to securities industry consensus, Samsung Electronics is projected to achieve Q2 revenue of 173 trillion won and operating profit of 85 trillion won, while SK Hynix is expected to post Q2 revenue of 83 trillion won and operating profit of 64 trillion won, totaling 256 trillion won in combined revenue.
Why do analysts view the market reaction as excessive?
Analysts note that Meta established its data center organization in January and CEO Mark Zuckerberg mentioned cloud business possibilities in May, indicating the strategy was not sudden. Additionally, Meta recently signed a 1.6GW computing contract with Crusoe and raised its annual Capex guidance by $10 billion in Q1, suggesting continued investment rather than reduction.
