[Weekend Money] "Time to End the Semiconductor 'Peak Debate'... Look at PBR, Not PER"

AI-Driven Transformation Breaking the Bounds of a Cyclical Industry
"Boom to Continue Through 2028 Amid HBM Supply Constraints"

As semiconductor stock prices continue to soar on the back of the artificial intelligence (AI) boom, some in the market are voicing persistent concerns that "we may be near the peak." However, analysts in the securities industry say the debate over a "peak-out" in the semiconductor cycle has in effect come to an end, and that a phase of structural valuation expansion driven by AI demand has begun.

Combination of Explosive Demand and Strong Supply Constraints

According to Kyobo Securities, researcher Choi Boyoung recently stated in a report titled "The End of the Semiconductor Peak Debate, the Era of Valuation Expansion" that the semiconductor industry has broken away from its traditional cyclical model and entered a massive paradigm shift driven by the AI revolution.

In particular, as earnings visibility and the quality of profits have moved to a fundamentally different level compared with the past, she pointed out that companies should be revalued based on the price-to-book ratio (PBR), which reflects their intrinsic asset value and medium- to long-term industry trends, rather than the price-to-earnings ratio (PER) based on short-term profits. She argued that PER can in fact be a misleading indicator when applied to the semiconductor sector.

Choi said, "Semiconductors are a classic cyclical industry, and despite the expansion of made-to-order production such as high-bandwidth memory (HBM), they have no choice but to repeat booms and busts due to the time lag between supply and demand," adding, "Around 2027 to 2028, big tech companies are likely to enter a phase in which their investment growth slows, due to the burden of depreciation stemming from accumulated large-scale investments and the physical constraints of power infrastructure."

She went on to stress, "It is far more reasonable to evaluate the semiconductor sector based on PBR, which reflects companies' intrinsic asset value, rather than PER, which is highly sensitive to short-term earnings."

Aggressive Investment by Global Big Tech and Long-Term Optimism

The rapid advancement of AI technology and the resulting explosive demand for memory underpin this assessment. As AI evolves into a stage where it supplements or replaces human labor, the overall size of the semiconductor market is expected to grow dramatically. On the supply side, however, structural constraints are emerging as HBM production significantly crowds out existing DRAM production capacity. Because HBM requires far more complex processes and consumes more wafers than standard products, physical expansion of supply is limited, and this supply-demand imbalance is creating strong downward rigidity in semiconductor prices.

Choi said, "Memory semiconductors are now being re-evaluated not merely as components, but as core infrastructure assets that will determine success or failure in the AI era," and analyzed that "with structural supply constraints intersecting with life-or-death infrastructure investments by global big tech companies, this supercycle will last longer and be stronger than ever before, continuing through 2028." In fact, major big tech firms, including leading cloud service providers (CSPs), are taking aggressive steps such as increasing capital expenditures this year by more than 90% year-on-year to secure leadership in AI.

As a result, expectations for Korea's leading semiconductor companies are also rising. The judgment is that, beyond short-term volatility, their value will continue to climb within the powerful structural trend of AI. For Samsung Electronics, Choi projected that the company will secure a competitive edge through synergies between mass production of next-generation HBM4 and its foundry processes, and she maintained her target price at 220,000 won. For SK Hynix, she sharply raised the target price to 1.2 million won, citing its unrivaled leadership in the high-performance memory market and shareholder-return policies that exceed market expectations, including share cancellations.