Samsung's (SSNLF, Financial) stock has plummeted 32% since reaching its annual peak in July, leading to a market value loss of $122 billion. This decline surpasses any other global chip manufacturer. Overseas investors have been exiting, selling approximately $10.7 billion in Samsung shares since late July. Analysts indicate that Samsung is losing its technological leadership in the semiconductor sector.
Earlier this year, Samsung seemed poised to capitalize on the global AI surge, with profits soaring and stock prices hitting record highs. However, growing concerns about its lag in the AI memory field behind smaller competitor SK Hynix and its inability to catch up with TSMC in chip manufacturing have led to a significant drop in share value.
The semiconductor business has been a major profit driver for Samsung in recent years. The company reported a 15-fold increase in operating profit for the June quarter, exceeding analyst expectations and temporarily boosting stock prices. Investors were optimistic about the potential for Samsung to secure more business, supplying high-bandwidth memory for NVIDIA's AI processors.
However, when SK Hynix announced it began mass production of new HBM chips, Samsung admitted a delay in producing its latest HBM generation, signaling it had fallen behind. Meanwhile, U.S. competitor Micron Technology increased its investments in HBM, reporting robust demand.
Samsung's chip division head issued a rare public apology for underwhelming third-quarter results, heightening concerns about its semiconductor business and prompting more foreign investors to sell Samsung shares. Since late July, foreign investors have withdrawn about $10.7 billion from Samsung.
Pictet Asset Management's senior investment manager, Young Jae Lee, expressed doubts about Samsung's ability to regain its technology leadership rapidly, stating that such leadership is hard to reclaim in the short term.
Samsung struggles to narrow the gap with TSMC in its foundry business, a costly and multi-year endeavor. The company has resorted to layoffs and other measures to manage the situation. Reports indicate a considerable number of Samsung's semiconductor engineers are contemplating moving to competitors or government-backed research institutions.
Despite Samsung's commitments to reform and regain competitiveness, international fund managers such as Pictet Asset Management Ltd. and Janus Henderson Investors remain pessimistic about a short-term turnaround. Janus Henderson Investors' SP portfolio manager, Sat Duhra, revealed that Samsung was their largest holding in July, but they have since halved their position. Although the stock's valuation is now attractive, they currently have no plans to purchase more shares.
Management may need to exert significant effort to regain investor confidence. By the end of the second quarter, Seoul's NH-Amundi Asset Management Co. equity investment head, Park Jinho, downgraded Samsung from "neutral" to "underweight" while increasing holdings in SK Hynix.
