Hello, this is Pazz.
Due to KOSPI's sharp decline yesterday and today, I imagine many people must be feeling uneasy.
Personally, I converted to cash too quickly in the market, and as I'm human, I experienced FOMO haha
(I've been in a state of over 80% cash for more than 2 months now)
From when it went over 5500, I entered 2x inverse in tranches, but when it went up to 6300, even I became confused about what I was thinking wrong.
But when I saw the inverse turned positive in just two days, I ended it with some profit-taking. It was my first time using inverse in my stock investing life, and I don't plan to do it again.
I think the current AI memory boom will continue for a while, and I believe it could go up to the 6,000 level again.
Here's my outlook for KOSPI's future. This is 100% my personal opinion, so please take it as reference only.
- Due to yesterday and today's events, the retail investors who recently entered the stock market won't be carelessly rushing in shouting 'Let's go!' anymore.
We won't hear talk of it going to 7,500 or 10,000 again. However, since KOSPI still has momentum, I think it could retest the 6,000-7,000 level in the short term.
- I believe the AI bubble will burst at some point in the first half of the year. The burst would be triggered by a decrease in big tech companies' CAPEX investment expectations. Even if stock prices face some correction, I don't think it will have a major impact on Samsung and SK Hynix's performance this year. The shortage is so severe this year anyway. Next year is the problem—memory company stock prices discount 6 months to 1 year ahead, so it's inevitable that stock prices will be negatively affected.
- One of my favorite economists is Professor Kim Young-ik. 'Doctor Doom'... he gets criticized for always being wrong... but I think he properly reads the biggest economic trends. Based on historical nominal GDP growth rates, Professor Kim Young-ik calculates that KOSPI's fair value centerline is currently around 3,500. The current index is a result of the AI bubble (rising memory prices) plus overshoot from retail investors' FOMO.
- In other words, if the AI bubble completely deflates, 3,500 would be the fair level. Since Samsung and SK Hynix's earnings will definitely be good this year and next year, I think the fair KOSPI level based on current conditions would be around the mid-4,000s.
- Of course, if memory enters a downturn after 2028, assuming the fair KOSPI index calculated with 2028's nominal GDP growth rate would be around 3,700-3,800, it would fall below that, so I think KOSPI discounting ahead could even reach the early 3,000s after 2027.
- In conclusion, considering the memory cycle, the current domestic market index is not one for long-term investment. The AI industrial revolution has structurally changed the memory market... I understand it to some degree, but is it really so? I have doubts. I'm personally a bit negative. I'm not a god either, and I never imagined Samsung would go to 200,000 won, so I don't know what will happen in the future, but I think we need to be careful about viewing the future through rose-tinted glasses.
- If we completely exclude the memory bubble caused by the AI revolution, the Samsung stock price I calculated is around 60,000 won, and SK Hynix is around 260,000 won as fair value. (Calculated based on past 5-year average operating profit.) That is, when a memory downturn comes, it's normal for prices to fluctuate around those levels. If the memory market hasn't structurally changed due to AI, there's a high possibility it will revert to those prices within 2-3 years. If you think about secondary battery companies' stock prices when people talked about EVs conquering the world 3 years ago compared to now...
- Don't misunderstand—I do admit to some degree that the memory market has changed from the past due to the AI revolution. During the mobile revolution and data center revolution in the past, memory skyrocketed and then crashed, with the cycle repeating, but the AI revolution does seem a bit different in character. However, we shouldn't be too consumed by this narrative. I also don't know how things will unfold in the future. We need to keep up with the news and have scenarios in our minds to respond accordingly.
- I've finished the manuscript for a book about the semiconductor market, memory cycles, and stock investing, and I'm preparing for publication. It looks like it will be formally published as a paperback next month or so. I wish it had come out a bit sooner, but I think the timing is a bit late. Once the book is officially published, I'd like to introduce it here with the forum moderator's permission.
Since it's fallen so sharply yesterday and today, I'm thinking there might be a short-term bounce in the next day or two, and I did buy a small amount of Samsung at the closing price for the short term (less than 5% of my seed capital)... haha. Always remember: scaled! purchase! amounts! Even if I eat small, approaching it with scaled purchases puts my mind at ease. I think the market right now is exactly like that.
