17 semiconductors in the top 30 in KOSDAQ market cap... Valuation caution following AI boom

Market cap of 17 semiconductor companies: 34.9 trillion → 83.7 trillion... 140% increase in 9 months

7 top 10 bio sites at the beginning of the year → 1 place… KOSDAQ market capitalization pivot shift

Reflecting expectations for growth in AI and HBM… Increased corporate value must be proven through performance

The top ranks of KOSDAQ Market Capitalization are rapidly being reorganized into semiconductor materials, components, and equipment stocks. There is a clear possibility that increased investment in AI and high-bandwidth memory (HBM) will lead to improved performance of the domestic semiconductor supply chain. However, there are growing voices calling for checking how much the market has already reflected future profits and whether the concentration in certain industries has reached an excessive level.

Semiconductor division manager who dominates KOSDAQ

As a result of the Market Times' analysis of the prices of all KRX (KRX) stocks, 17 companies related to semiconductors and semiconductor materials, components, and equipment were counted among the top 30 companies in KOSDAQ Market Capitalization as of the closing price on October 2. This is 56.7% of the top 30 companies.

These include Jusung Engineering, Wonik IPS, EO Technics, Simmtech, Reno Industrial, HPSP, ISC, PSK, Fado, PSK Holdings, Eugene Tech, Hana Micron, TES, TCK, Soulbrain, TSE, and Jeju Semiconductor.

Jusung Engineering, known as ‘His Majesty Juseong’ among investors, is recently ranked in the top 3 in KOSDAQ Market Capitalization. As of October 2, among the top 10 KOSDAQ market caps, 6 are semiconductor-related stocks, including Jusung Engineering, Wonik IPS, EO Technics, Simmtech, Reno Industrial, and HPSP. This is in contrast to the fact that on January 2nd, the first trading day of this year, there were no semiconductor-related companies in the top 10 market cap.

The combined market capitalization of 17 semiconductor-related companies currently in the top 30 market capitalization increased from approximately 34.9 trillion won on January 2 to approximately 83.7 trillion won on October 2. It has increased by approximately 48.9 trillion Won in 9 months, an increase rate of approximately 140%.

In particular, Jusung Engineering's Market Capitalization rapidly increased from approximately 1.4 trillion Won to 11 Trillion Won during the same period, rising to 4th place in KOSDAQ market capitalization. This is the background to the emergence of the nickname ‘His Majesty Juseong’.

The analysis is that investment in AI servers, expansion of HBM, and expectations of a recovery in the memory industry are driving up the stock prices of overall equipment and component stocks. Micron's strong performance and expansion of investment in global AI infrastructure are also seen as a background for raising expectations of increased orders from domestic semiconductor equipment and equipment companies.

In bio, only Alteogen is in the top 10.

On the other hand, the presence of KOSDAQ bio stocks quickly decreased. Among bio companies, Alteogen maintains first place in KOSDAQ Market Capitalization, and there are eight bio companies in the top 30, including HLB, which ranks 11th, and the cosmetic medical company Pharma Research. Alteogen is the only bio company in the top 10 in Market Capitalization.

On January 2, the first trading day of this year, seven pharmaceutical and bio companies, including Alteogen, ABL Bio, HLB, RigaChem Bio, Kolon TissueGene, Peptron, and Samchundang Pharmaceutical, ranked in the top 10 in KOSDAQ market capitalization.

At the time, the combined market capitalization of these seven companies was approximately 65.9 trillion Won. However, on October 2, the combined market capitalization of the same seven companies decreased to approximately 38.6 trillion Won. It is a decrease of approximately 27.3 trillion Won, or 41%, in 9 months.

It is difficult to explain the change in the top rankings of KOSDAQ market capitalization this year simply because semiconductor stocks rose and bio stocks fell in relative rankings. The decline in the market capitalization of bio companies and the expansion of the market capitalization of semiconductor companies occurred simultaneously.

While the market capitalization of the 7 top 10 bio companies at the beginning of the year decreased by approximately 27.3 trillion Won, the market capitalization of the 17 semiconductor companies currently included in the top 30 increased by approximately 48.9 trillion Won. At the beginning of the year, the combined market capitalization of the 7 bio companies was 65.9 trillion Won, which was about 1.9 times larger than the combined market capitalization of the 17 top 30 semiconductor companies at the time, which was 34.9 trillion Won. In October, the relationship reversed as 17 semiconductor companies increased to 83.7 trillion won, while 7 bio companies decreased to 38.6 trillion won.

This does not mean that the value of the K-bio industry has disappeared, but rather that growth expectations for AI and semiconductors have grown rapidly at the same time as the market capitalization of bio companies has decreased. KOSDAQ has repeatedly shown the characteristic that when the growth narrative of a specific industry becomes stronger, the top market capitalization quickly focuses on one industry.

Between paradigm shift and overheating

AI and HBM are structural changes that cannot be dismissed as mere fads. The spread of generative AI is simultaneously increasing demand for data center investment, high-performance memory, advanced packaging, semiconductor equipment, inspection equipment, substrates and materials. This is why expectations are being formed that profit estimates may be raised throughout the semiconductor supply chain.

However, the growth rate of an industry and the fair value of an individual company are two different things. It is assessed that the current KOSDAQ semiconductor stock price largely reflects optimistic scenarios such as increased orders for the next few years, increased facility investment by customers, continued HBM supply shortage, and increased investment in high-end servers.

It is the nature of the stock market that stock prices move ahead of performance. The problem is when estimated future profits are drawn excessively into current Market Capitalization. If the growth rate is lower than expected or if orders and performance do not meet expectations, there is a risk that valuation adjustments will occur quickly and deeply.

The semiconductor equipment and parts industry is sensitive to customer companies' facility investment cycles and memory prices, the pace of AI investment by global big techs, semiconductor regulations between the U.S. and China, and competitors' capacity expansion plans. If the competition for AI hegemony prolongs, the scope of benefits may expand, but if investment speed is adjusted or concerns about oversupply arise, the market may change its current friendly face.

Memories of focus on secondary batteries and biotechnology

The KOSDAQ market has experienced extreme concentration in the past when a specific growth industry emerged as a leading stock. The closest example is the secondary battery craze. Secondary battery materials and equipment stocks were at the center of the market amid huge industrial changes such as the transition to electric vehicles and reorganization of the battery supply chain, but the market quickly began to weigh in as the growth rate slowed, demand forecasts were adjusted, and the gap between performance and stock prices widened.

The same goes for bio. Whenever expectations for technology exports, clinical progress, and contracts with global pharmaceutical companies increased, the top ranks of the KOSDAQ market cap were filled with bio stocks. On January 2, the first trading day of this year, seven pharmaceutical and bio companies ranked in the top 10 in KOSDAQ market cap, but currently only Alteogen remains in the top 10.

Market interest does not last forever. As growth expectations for any industry reach their peak, investors should consider not “Is it a good industry?” but “How much of the future is already reflected in the current price?”

Semiconductor stocks should be viewed as companies, not industries.

What is important in investing in semiconductor stocks is not the grand narrative of AI and HBM, but how quickly and surely the benefits are connected to each company's sales and profits.

Even for the same equipment and parts company, the direction of performance varies greatly depending on the customer, product, role within the process, and order structure. Just because a customer company announces a large-scale facility investment does not mean that an equipment company's sales will immediately increase. It takes a considerable amount of time to select equipment, order it, deliver it, install it, and inspect it. For stocks whose stock prices move ahead of actual orders and sales, volatility may increase during the performance confirmation phase.

When it comes to the order backlog, the content is more important than just the size. It is necessary to determine whether it is a confirmed order with a low probability of cancellation, whether it is highly dependent on a specific customer, or whether it is a one-off order or whether it can lead to repeat sales. If a customer's facility investment schedule is adjusted or the memory industry takes a turn for the worse, the performance outlook of a company with sales concentrated in a specific customer may be quickly shaken.

Technology entry barriers and customer diversification are also key. Companies with technology that is difficult to replace in a specific process, high yield and productivity, and experience in joint development with customers can have relatively high defense power during periods of industry fluctuations. On the other hand, companies focused on general-purpose equipment or parts with fierce price competition can grow rapidly during industry booms, but if facility investment slows, the decline in profitability may increase.

Whether or not AI and HBM will benefit must also be confirmed based on the actual proportion of sales. Companies directly connected to HBM inspection equipment, advanced packaging, high-spec substrates and materials, power semiconductors, and AI server components can obtain structural growth opportunities. However, the name ‘AI-related stock’ or ‘HBM beneficiary stock’ alone is not enough. It is necessary to look at the proportion of the business in total sales, whether new orders are reflected, and whether it has entered the customer certification and mass production supply phase.

Along with sales growth, operating profit rate, inventory, accounts receivable, and cash flow must also be checked. Even if the top line grows, it is difficult to justify a high corporate value if profitability does not improve due to cost burden and sales price competition, or if cash flow worsens due to increased working capital.

The change in the semiconductor industry led by AI and HBM is clear. However, there is a need to be wary of the fact that more than half of the top 30 KOSDAQ market capitalization stocks are filled with semiconductor-related stocks, as market expectations are rapidly concentrating in one direction.

In the end, the winners of this semiconductor rally are not expected to be all companies with the name AI, but rather companies that prove the heightened expectations with actual orders, profits, cash flow, and technological competitiveness.