Will 2029 see a memory "red ocean"? South Korean finance minister speaks out: semiconductor boom to last at least until next year

South Korean Finance Minister Lee Hyoung-Il said on Saturday that the semiconductor industry's boom will last at least until 2027. "Currently, we believe growth can continue at least until next year. This is because the supply-demand gap for semiconductors remains very large, and the supply side is still expanding," Lee said in a media interview during the IMF and World Bank annual meetings in Bangkok. Supply-side expansion refers to capital expenditure and capacity expansion under construction, indicating that the current chip industry remains highly prosperous with strong demand, although in the long term this means the supply-demand gap will narrow. Lee's remarks came as the semiconductor sector fell sharply in the just-concluded trading week, pressured by investor concerns over Federal Reserve rate hikes and intensifying industry competition. South Korean chip stocks, including Samsung, SK Hynix and Seoul Semiconductor, were hit by heavy selling. Last Thursday, led by Samsung and SK Hynix, South Korea's benchmark KOSPI index fell more than 8%, triggering a circuit breaker for the tenth time this year and prompting South Korea's Financial Services Commission to convene an emergency meeting to discuss the stock market plunge. Meanwhile, U.S. tech giants such as Nvidia also fell sharply. Last Friday, as investor concerns over AI financing risks intensified, a wave of tech stock selling swept through the U.S. stock market again, with the Nasdaq falling more than 2%. On a weekly basis, the Nasdaq fell 4.48% cumulatively, marking its largest weekly decline since the "dark June" of AI trading. As star theme stocks including Micron, SanDisk, AMD, Intel and Lumentum fell collectively, the Philadelphia Semiconductor Index closed lower last Friday for the eighth consecutive trading day, the longest losing streak since 2008. The index fell 11.4% for the week and more than 13% over the past eight trading days, wiping out about $2 trillion in market value. Lee said chip stocks triggered sharp volatility in the South Korean stock market this year. He attributed the severe market swings to the semiconductor industry accounting for a larger share of South Korea's economy than in other countries. Despite the sharp market volatility, Lee said South Korea's economy has "solid fundamentals." On Thursday, a commentary in South Korea's major business daily Maeil Business Newspaper called on the government to prepare for an impending slowdown in the AI boom. Citing two experts, the author said that by 2029, semiconductors are expected to see "a large amount of new supply," turning the memory chip market into a "red ocean." Lee said that while the semiconductor industry has caused volatility in South Korean stocks, it has also driven tax revenue growth. South Korea's tax revenue this year is expected to exceed initial forecasts. He added that South Korea's fiscal position will be stronger thanks to the chip industry's boom. Meanwhile, as tech stocks represented by chip shares came under heavy selling, Nvidia CEO Jensen Huang has frequently stepped in to reassure investors. He said on Thursday that customer orders for AI chips continue to exceed the company's supply capacity, with new orders pouring in "almost weekly, even daily." In response to investor concerns about AI financing risks, Huang said recently that he sees no reason for Nvidia to provide backstop support for CoreWeave, and said "their cost of capital is actually coming down." Dan Ives, a tech analyst at Yorkville Ives, said last week that the latest round of AI-related stock selling reflects growing market concerns over the cost of financing large-scale infrastructure projects as U.S. Treasury yields climb above 5%. This is a financing-level issue, while on the demand side, underlying demand for AI computing power remains strong. He places more weight on changes in demand signals than on rate signals and believes the latest pullback offers buying opportunities. This article is reprinted from Cailian Press. Edited by Chen Wenfang for GMTEight.