Although a strike by some 45,000 employees at Samsung in South Korea may have been put on hold – leaving data centres and other users of memory chips to breathe a sigh of relief – it has flagged the current supply/demand balance in the global chip market amid the broader continued rollout of AI, according to comments from Ben Shields, investment manager at Aubrey Capital Management.
Competitors including Micron and SanDisk had seen gains ahead of the planned strike, with conversely, Samsung shares rising sharply when news of the strike being put off came through.
Shields commented: “Memory remains cyclical, but the current setup looks materially different from the traditional boom-bust pattern. Historically, the challenge with memory stocks has been that strong demand encourages new capacity, supply eventually overshoots, and pricing collapses. That risk has not disappeared, but the recent rebound has been supported by earnings upgrades rather than simple multiple expansion.”
“That distinction matters. Share prices have risen, but expected earnings have risen faster. This suggests the recovery is being underpinned by real profit momentum rather than speculative enthusiasm alone.
“Performance has also not been dependent on a single AI theme. Recent results across the sector have been broadly encouraging, including from companies with more limited direct AI exposure, which helps demonstrate the breadth of the opportunity set. There will always be individual disappointments and short-term volatility, but the wider picture remains constructive.
“The structural change is that advanced memory has become a bottleneck for AI infrastructure. Supply is difficult to add quickly, customer requirements are becoming more specialised, and demand is increasingly tied to long-term technology investment rather than short-term inventory cycles.
“We are not complacent. Capacity will eventually arrive. For now, positive earnings, cashflow and balance-sheet support suggest this is more than a conventional memory cycle.”
Issues involving Samsung in the Korean stock market matter. Along with fellow memory chip maker SK Hynix, the two easily dominate the local Kospi 200 index – to the extent that some years ago the index briefly introduced a weighting cap of some 30%. That was removed, but Samsung alone can account for between a fifth and a third of the index over time by weighting, depending on valuations.
