The technology sector has seen a strong run in recent times within the last year and there has also been an increased interest in large-cap technology stocks, particularly those involved with the production of semiconductors. In recent times, both Samsung and SK Hynix have seen their stock prices rise considerably due to the increased demand for Artificial Intelligence (AI) products.
The trigger of this increase in demand for the semiconductor companies is Samsung's revised net income estimates for Q1 to slightly higher levels than anticipated, which has resulted in an overall increase in individual stock prices for both Samsung and SK Hynix. When Samsung announces positive earnings estimates, it generally affects the soundness of other companies in that same sector. That is, an increase in the outlook for Samsung usually translates into an increase to the value of SK Hynix.
AI and Growth: Exploring AI Growth Factors
What Causes AI To Grow?
The easiest way to say this is to say it is due to Artificial Intelligence (AI).
As AI continues to grow more rapidly, the need for satellites and satellite systems to support AI will grow. Therefore, there will be a dramatic increase in demand for the two types of memory chips that are also used to manufacture satellite memory chips (e.g., NAND and DRAM) due to the need for each type of memory chip being produced (and sold).
Take the example of capital markets. If you are an investor and are seeing an increase in the amount of capital being invested to build more data centres, you will be excited. The same is true when you see more and more companies becoming greater than ever before by using some version of AI.
Investors will then want even more and better performing chips produced to keep pace with AI growth. The two “big” manufacturers of NAND and DRAM are both producing high-performance chips, and they are both seeing significant increases in the price of their respective products.
Thus, the increase in prices of memory products from Samsung and from SK Hynix is actually not random; rather, they are part of a long-term cycle of economic growth, driven by improvements in technology (i.e. through AI) which will continue to produce new business opportunities in larger quantities than ever before being encountered.
In conclusion
Samsung and SK Hynix's share price rises are due to AI demand reflecting a bigger trend.
There are signs that continue on with regard to AI, are good indicators of continued success in its semiconductor industry's future.
How's this: AI increases → demand for chips increase → companies make greater profits → stock prices rise.
Do you feel there are remaining opportunities in the decades to come in the AI market?