Trim Samsung Electronics, SK hynix holdings and shift to materials, parts and equipment, NH-Amundi says

Reducing overexposure to the two dominant semiconductor names — Samsung Electronics and SK hynix — and shifting weight toward materials, parts and equipment companies has been put forward as the key strategy for improving returns, as earnings estimates for both firms have stalled in recent months.

Some analysts say the AI cycle is still in its early stages, making this the wrong moment to reduce overall AI exposure. A two-track approach — staying invested in the AI value chain while also holding quality shares capable of weathering a high-rate environment — is seen as the more effective path.

NH-Amundi Asset Management held a press briefing Monday at FKI Tower in Yeouido, Seoul, to mark the first anniversary of its NH-Amundi Growth-Led Korea Fund.

The fund, an actively managed equity vehicle investing in companies expected to lead AI, green energy and capital market development, was launched on Oct. 14, 2025. As of Wednesday, the fund had posted a return of 84.86 percent, outpacing the Kospi's 67.63 percent gain over the same period by 17.23 percentage points.

About 80 percent of the fund's outperformance against the Kospi has come from the semiconductor and IT hardware sectors. At Monday's briefing, however, the firm outlined a strategy to trim that semiconductor weighting.

Choi Chi-hyun, a deputy head at the firm's equity management division, said the core strategy centered on semiconductors and IT hardware remains valid even in a high-rate environment, but that the heavy concentration in large-cap names such as Samsung Electronics and SK hynix needs to change.

Earnings estimates for both companies have been flat for two consecutive months, which could reduce their sensitivity relative to the broader market, the firm said. NH-Amundi plans to shift a portion of its holdings in the two companies into semiconductor materials, parts and equipment stocks in the second half of the fund's operation.

Choi added that investment in front-end semiconductor equipment is expected to rise sharply next year, making materials, parts and equipment companies likely candidates to lead a second leg of gains in the sector. In IT hardware, the firm said it would maintain a high weighting in packaging substrate companies, which are benefiting from a trend toward larger and higher-layer designs as semiconductor performance improves.

The firm also outlined a hedging strategy for volatility management. It proposed adding bank and insurance stocks as a buffer against rising interest rates, and oil refining and gas stocks as a hedge against inflation. Among financial shares, the firm said it prefers insurers, citing improving insurance profit margins and the potential for expanded shareholder returns if regulations on surrender-value reserves are revised.

Secondary battery makers were also highlighted as a sector with strong earnings improvement visibility for next year, with the firm pointing to growth in the US energy storage system market and expected benefits from local production in Europe.

The briefing also addressed the recent weakness in memory chip share prices. Samsung Electronics and SK hynix closed Friday at 215,500 won and 1.272 million won, respectively — down 40.6 percent and 56.4 percent from their respective all-time closing highs.

Unlike GPUs and foundry services, which operate under near-monopoly structures, the memory chip market faces intense competition, and memory's growing share of total system costs has added to the pressure on valuations, the firm said.

Still, the firm maintained that underlying AI demand remains solid. Park Jin-ho, head of the equity management division, said the spread of AI agents is driving rapid growth in token demand, keeping AI-related demand ahead of supply. "Recent share price corrections have deepened market uncertainty, but new business models are emerging alongside the expansion of AI agents, and the AI cycle is now entering full swing," Park said.

The firm identified shareholder returns as the key catalyst for a re-rating of Korean equities. Park said the combined shareholder return from Samsung Electronics and SK hynix next year is expected to reach around 300 trillion won ($223 billion), drawing a parallel with Apple, which launched large-scale buyback programs during a period of slowing earnings growth and subsequently saw its share price rise sharply.

For the market's base-case scenario, the firm projected a gradual upward trend against a backdrop of sustained high interest rates. It advised maintaining a focus on the semiconductor-centered AI value chain while pairing that with investments in quality shares that can withstand elevated rates. The green industry is another area of interest: Park said investment opportunities will emerge across the broader green sector, including batteries, electric vehicles and small modular reactors.