Samsung, SK Hynix Erase Early Gains as US ‘Blue Wave’ Fuels Data-Center Demand Fears

Samsung Electronics and SK Hynix rose early on Nov. 4 but ended slightly lower

Fears grow that data-center regulation could delay investment

Brokerages say earnings outlook remains intact amid memory shortages

Samsung Electronics and SK Hynix gave up early gains on Nov. 4 and ended slightly lower after a “blue wave” swept the U.S. midterm elections. Brokerages said investor sentiment weakened on concern that Democratic control of both chambers of Congress could tighten data-center regulation and put the brakes on semiconductor demand.

Samsung and SK Hynix erase intraday gains and close lower

According to the Korea Exchange, Samsung Electronics closed at 218,000 won on Nov. 4, down 1,500 won, or 0.68%, from the previous session. SK Hynix fell 2,000 won, or 0.14%, to 1.396 million won. Both stocks had risen early in the session, with Samsung up more than 3% and SK Hynix up more than 5%, before surrendering all of those gains. The Kospi closed up 35.01 points, or 0.62%, at 5,683.80.

Early buying was driven by expectations for strong earnings from U.S. chipmakers and AI server companies. The Philadelphia Semiconductor Index rose 2.63% overnight, and AMD projected fourth-quarter revenue of about $17 billion after the close, topping market expectations. Super Micro Computer also raised its annual revenue forecast, reinforcing optimism over AI server demand.

Sentiment shifted as vote counting progressed in the U.S. midterm elections. Major U.S. broadcasters projected that Democrats would secure majorities in both the House and Senate, sharpening focus on regulatory concerns over data-center permits and the cost of power-grid expansion. Lee Kyung-min, an analyst at Daishin Securities, said growing odds of a Democratic victory fueled worries about tighter AI data-center regulation and slower construction, hurting investor sentiment.

Data-center regulation fears rise as execution speed matters more than spending size

The regulatory debate stems from local opposition to data centers’ heavy use of electricity and water, as well as higher power bills. If developers are required to shoulder more of the cost of grid expansion or face tougher permitting standards, construction costs could rise and project timelines could slip.

Seo Sang-young, an analyst at Mirae Asset Securities, said Democratic control of Congress could intensify policy discussions on making developers, rather than ordinary consumers, bear the cost of expanding power grids for data centers.

Delays in data-center construction could also affect demand for chips used in servers. If completion schedules slip, orders for products such as high-bandwidth memory, or HBM, could be pushed back. Higher power-related costs could also reduce purchases of servers and memory.

Still, the election result does not mean regulations will be imposed immediately. Actual legislation and implementation would require agreement between the two chambers, the president’s signature and follow-up action by state-level power regulators, Seo said. That means no immediate requirement has been finalized to force developers to absorb those costs. Rather than curbing overall AI investment, the outcome could instead affect the cost structure and investment schedules of new projects.

‘Delay in project starts’ differs from canceled orders as memory shortages persist

Some analysts said the market reaction was excessive because Democratic strength had already been widely seen as the base-case scenario. Lee Jae-won, an analyst at Yuanta Securities, said a Democratic sweep of both chambers had been reflected before the election with a probability of more than 60%, making it difficult to view the outcome as a new negative.

Analysts also said it is too early to conclude that memory demand will weaken even if data-center construction starts are delayed.

Lee said delays in project starts caused by tighter regulation should be distinguished from outright cancellations of server and memory orders. Given the expansion of long-term supply agreements and constrained memory production capacity, there is not enough evidence to conclude that delays in executing some projects alone would push down average selling prices for memory.

Brokerages maintained expectations for earnings improvement driven by persistent memory shortages. On Nov. 4, KB Securities projected combined fourth-quarter operating profit for Samsung Electronics and SK Hynix at 23.2 trillion won. It said rising HBM production would tighten supply of conventional memory even further.

Kim Dong-won, an analyst at KB Securities, said Samsung Electronics and SK Hynix currently have less than 10 days of memory inventory. A higher share of HBM output next year would create a supply cliff in conventional memory and deepen shortages further, he added.

Analysts said the next rebound will hinge on the strength of regulation and spending plans from big tech companies. Seo said semiconductor shares, which have fallen sharply in recent sessions, could rebound if the scope of any regulation proves limited and if big tech companies keep their AI investment plans largely unchanged.

Lee added that the case for a recovery in large-cap chipmakers would remain intact if, after election uncertainty clears, long-term interest rates and credit risk stabilize and foreign investors turn into net buyers.

Kim Yeon-ji, Hankyung.com reporter kongzi@hankyung.com