Leveraged ETF Distortion Aside, SK Hynix ADR News Fuels 4% KOSPI Rally

Analysts traced how AI-industry bottlenecks have cascaded sequentially: starting with Nvidia GPU shortages for training generative AI, moving to memory shortages, then CPU demand for inference, followed by TSMC-led advanced packaging, substrates (including upstream materials like CCL, copper foil, glass fiber, and glass substrates), MLCCs (Samsung Electro-Mechanics), power semiconductors, and inspection equipment, with optical communications and semiconductor equipment now flagged as the next beneficiaries and both surging on the day.

Bitgwa Electronics hit the daily upper limit, Daehan Optical Communication jumped about 23%, and Korea Advanced Materials gained about 19%. Hosts cautioned that while such cascading demand typically signals a genuine industry boom, past cycles, such as construction, cement, construction equipment, and building materials stocks all rising in sequence, eventually marked a market top; the key test, they said, is whether front-end demand itself begins to shrink, not merely whether the cascade has run its course.

The defense sector was the focus of an interview with LS Securities analyst Lee Jae-gwang. He attributed much of the recent underperformance in defense shares to a rotation of capital toward semiconductors, a pattern that persists whether chips rally or fall, compounded by a lack of major new order momentum and Korea's failed bid for Canada's submarine program, which weighed on sentiment.

Comparing enterprise value to order backlog, Hanwha Aerospace and Hanwha Systems trade at relatively higher multiples while LIG Nex1 and Korea Aerospace Industries (KAI) trade lower, suggesting the latter are undervalued on a backlog basis. On a forward-earnings valuation basis, however, the picture reverses, with Hanwha names looking cheaper, reflecting that their margins and earnings are already well reflected in results, whereas LIG Nex1 and KAI's order backlogs have not yet fully converted into earnings.

Lee advised against reading too much into quarterly defense earnings and instead urged investors to track order backlog trends as the key metric, noting that defense is a classic order-driven business where meaningful stock gains typically occur around major order/export announcements and again once those orders convert into confirmed earnings.

UBS said global memory sales reached about $74.6 billion in June, a monthly record, with NAND sales up roughly 40.7% month over month and DRAM sales around $48 billion. UBS expects memory prices and shortages to persist through mid-2028, with Micron, Samsung Electronics, SK Hynix and SanDisk seen as the biggest beneficiaries, while Bernstein offered a more cautious view, projecting price gains could slow sometime between late next year and 2028.

Micron raised its planned U.S. investment through 2035 to $250 billion from $200 billion, saying it had begun pouring concrete at its New York semiconductor plant ahead of schedule and would put roughly $500 million toward expanding GlobalWafers' Texas silicon wafer facility.

Applied Materials' chief executive said the chip industry's upcycle should continue for several more years, prompting TD Cowen and Mizuho to raise price targets to $700 and $650, respectively. Rising industry-wide capital spending and steady equipment demand were cited as easing concerns about the sector's outlook.

The IMF raised its 2026 growth forecast for South Korea more than for any other G30 economy, citing strong AI-driven chip demand, lifting its outlook to 2.6% from 1.9% for this year and to 2.5% from 2.1% for next year.