"Semiconductors and Nuclear Power Enter a Single AI Supercycle" [Click eStock]

"Combined Market Capitalization of Samsung Electronics and SK Hynix Projected to Reach 1,500 Trillion Won"

Despite ongoing debates about an artificial intelligence (AI) bubble, analysts predict it will not burst easily. Instead, they view this as an inflection point for growth not seen in a century, and forecast that AI, together with nuclear power, will enter a 'supercycle.'

On November 18, KB Securities released a report titled "Semiconductors and Nuclear Power: One Supercycle," outlining these views. The report identifies AI as the first major industrial growth inflection point since the advent of electricity in the 1890s. Like the widespread adoption of power grids, AI is expected to become a foundational infrastructure across all industries, driving innovation in productivity and cost reduction.

The report also concludes that, even if there is an AI bubble, it is unlikely to burst without an external shock. Currently, the price-to-earnings ratio (PER) for some AI companies exceeds 200 times. However, the projected net profit growth rate for the so-called M9 companies-Magnificent 7 (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, Meta) plus Broadcom and Oracle-exceeds 20% for next year. This is double the 10% projected net profit growth rate for the 491 companies in the S&P 500. Furthermore, the average PER for the M9 companies is 30 times, which is half the 60 times average PER seen among dot-com companies in 1999.

The report explains, "Unless a market shock occurs, such as the US Federal Reserve abruptly tightening monetary policy, even if there is an AI bubble, it is unlikely to burst easily."

Samsung Electronics and SK Hynix, the leading stocks in the Korean stock market, are cited as the biggest beneficiaries of the AI cycle. With the growth of their HBM (High Bandwidth Memory) businesses, their combined operating profit is projected to reach 156 trillion won next year. The report assesses that a combined market capitalization of 1,500 trillion won (1,000 trillion won for Samsung Electronics and 530 trillion won for SK Hynix) would be appropriate. As of the previous day, their current market capitalizations stood at 595.5156 trillion won and 441.1694 trillion won, respectively.

The report also anticipates that nuclear power will experience a 'supercycle' alongside semiconductors. The United States and other countries are preparing for a nuclear renaissance on a scale not seen since the Chernobyl disaster in 1986, raising expectations for the revival of the nuclear power cycle after 40 years. Notably, the US government has explicitly stated its support for all aspects of Korean nuclear projects, including civilian nuclear power, small modular reactors (SMRs), nuclear fuel supply chains, and naval reactors. The report notes, "If AI is likened to a human, semiconductors are the brain and nuclear power is the heart," adding, "A stable power supply is essential for the uninterrupted 24-hour operation of AI semiconductors."

Accordingly, KB Securities has recommended Samsung Electronics, SK Hynix, Doosan Enerbility, Korea Electric Power Corporation, and Hyundai Engineering & Construction as its top picks.

This content was produced with the assistance of AI translation services.