Will Morgan Stanley prove its credibility?

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Will Morgan Stanley prove its credibility?

Published: 06 Oct. 2024, 20:16

CHO WON-KYEONG
The author is a professor at UNIST and the head of the Global Industry-University Cooperation Center.

The Financial Supervisory Service and the Korea Exchange have launched an investigation into a foreign investment bank. Their target is Morgan Stanley, which published a report on the semiconductor sector titled “Winter is Coming” on Sept. 15.

Morgan Stanley slashed the target stock price of SK Hynix from 260,000 won ($193) to 120,000 won. It pointed out that the demand for dynamic random-access memory (DRAM) was decreasing and there’s a high risk of oversupply of high bandwidth memory (HBM). Morgan Stanley deserves punishment if it had made an advance sale using undisclosed information.

The problem is that Macquarie also lowered the target stock price of Samsung Electronics from 125,000 won to 64,000 won, calling it a “sick semiconductor giant.” On Sept. 2, Samsung Electronics’ stock price hit the 50,000 won level and marked a new 52-week low.

But there are also objections. First, SK Hynix has mass-produced a 12-layer HBM3E which embodies the maximum capacity of 36 gigabytes. The new HBM3E will be delivered to Nvidia in the fourth quarter. When Nvidia’s Blackwell series is launched next year, the products will become mainstream in the market.

Second, the growth of the global artificial intelligence (AI) market is rapidly moving from “learning” to “inference.” The AI inference chip market is expected to grow 24 times in 7 years by 2030. The rapid growth of AI inference chips will benefit Samsung Electronics and SK Hynix, leaders of the DRAM market.

Third, shares of Micron Technology — the largest memory chip producer in the United States — surged 14.73 percent after surprise earnings on Sept. 26. Another good news is that Micron’s HBM chips set to be manufactured this year and next year have sold out. The optimistic guidance eased concerns over winter in the chip industry.

Samsung Electronics’ earnings announcement on Oct. 8 will be the first to show which view is right. Morgan Stanley called SK Hynix “the least preferred stock” among global memory companies. If the report is wrong, I wonder who should embrace the whining investors who believed the report and sold off at a loss.