AI memory demand can keep growing while extraordinary profit margins retreat. My forecast allows higher sales, completed buybacks and substantial retained cash, but still points to a lower share price as new capacity approaches.
Key points
- $149.26 per ADS is my October 2027 target, supporting a sell.
- 60% operating margin in 2027 allows exceptional profitability without extending today's peak.
- KRW 210 trillion of net financial assets in October 2027 cushions the downside.
The call
The market is too optimistic about lasting profits. At my six-times operating-profit multiple, today's price requires a 2027 margin of roughly 74% on KRW 380 trillion of sales. Alternatively, my profit forecast needs a 7.4-times multiple. Investment gains are not chip earnings.
Quarterly chip operating profit (KRW billions)- Reported operating profit
- My operating-profit forecast
Company releases, Apr 2024–Jul 2026; desk estimates Oct 8, 2026. Reference: 2027 average needed at 6 times.
I expect growing sales but shrinking margins. My 2027 revenue forecast exceeds the June quarter's annual pace by 20%, supported by advanced AI memory and server storage. However, expanding factories and customers' resistance to higher prices should weaken scarcity profits. Customer agreements lack disclosed price floors; they cannot establish permanent peak profitability.
Valuation
| My forecast or valuation input | Figure |
|---|
| 2027 revenue | KRW 380 trillion |
| 2027 operating margin | 60% |
| 2027 operating profit | KRW 228 trillion |
| Operating-business valuation | 6 times operating profit |
| October 2027 financial assets, net of debt and tax claims | KRW 210 trillion |
| October 2027 target | $149.26 per ADS |
Six times reflects my expectation that investors will again treat memory profits as cyclical, rather than permanently protected by AI demand. Conversion assumes KRW 1,500 per dollar and 7.05 billion ADS-equivalent shares after the authorized repurchase, whose completion remains unverified. The asset forecast credits approximately KRW 91 trillion of retained cash; a 45% margin instead would imply about $117 per ADS, reinforcing the sell despite the strong balance sheet.
The share forecast depends on 2027 profit marginsDesk calculations, Oct 8, 2026. Revenue KRW 380tn, 6 times operating profit; other assumptions unchanged.
Risks
- Scarcity persists longer: watch realized memory selling prices and factory commissioning delays.
- Contracts protect profits more strongly: watch disclosure of enforceable minimum prices and purchase commitments.
- Currency or financial investments lift dollar value: watch the won, portfolio valuations and cash distributions rather than headline earnings alone.
What would change my mind
Two consecutive quarters through September 2027 with semiconductor operating margins above 70%, alongside rising shipments, would overturn my margin-normalization thesis.