A low P/E ratio usually looks attractive. For investors in memory semiconductor stocks, however, that simple rule can be dangerously misleading. A memory company can look cheapest on earnings precisely when its profits are approaching a cyclical peak. And it can look extraordinarily expensive — or have no meaningful P/E ratio at all — when the cycle is near a bottom. This is one reason Samsung Electronics and SK Hynix have historically been difficult companies to value. But the AI memory boom is making the problem more interesting. The old memory cycle has not disappeared. What may be changing is the level of profitability to which the industry eventually returns. And if AI is raising the sustainable earnings power of leading memory producers, investors may need to rethink not only P/E, but also the P/B multiples they have traditionally used to value Korean semiconductor stocks. The P/E Paradox in Memory Stocks The price-to-earnings ratio has an intuitive appeal. Divide a company...
Reshaping the Global Economy. Global Markets, Perspectives and Insights.