JPMorgan's Buy Signal for Samsung and SK Hynix: Should You Follow?

JPMorgan has flagged Samsung Electronics and SK Hynix as potential rebound candidates after weeks of aggressive selling across the South Korean market. 

The bank's latest research indicates that the forced deleveraging from leveraged ETFs is nearly complete, which could lift the pressure that drove the KOSPI down roughly 35% from its June 2026 peak. 

Semiconductor fundamentals remain intact, and the case for following this signal depends on whether the sell off is technical or structural. Here is the breakdown.

Key Takeaways

• JPMorgan says the forced selling from leveraged ETFs in South Korea is approaching its end, removing a major source of downward pressure on Samsung and SK Hynix.
• The KOSPI correction appears driven by capital flows and deleveraging mechanics rather than a fundamental collapse in corporate earnings.
• SK Hynix reported record Q2 2026 results with a 76% operating margin, while AI driven memory demand continues to underpin the long term outlook for both chipmakers.

What Triggered the KOSPI Sell Off?

The South Korean stock market experienced one of its sharpest declines in decades during July 2026. 

The KOSPI fell roughly 35% from its June high, triggering multiple circuit breakers and forcing billions of won in margin calls. 

Image Source: Tradingview

The primary catalyst was the rapid unwinding of leveraged ETF positions tied to Samsung Electronics and SK Hynix. 

Single stock leveraged ETFs tracking these two companies had grown to nearly 10 trillion won in assets under management by mid 2026, fuelled by retail investors chasing the AI semiconductor rally.

When share prices started to pull back, the forced rebalancing mechanisms built into these leveraged products created a cascading cycle of selling. The KODEX SK Hynix Single Stock Leverage ETF lost over 80% from its June 23 peak. 

Samsung's equivalent product dropped nearly 75% from its early June high. South Korea's Financial Services Commission has since banned new single stock leveraged ETF launches and tripled the minimum deposit requirement to 30 million won.

JPMorgan's latest report argues that most of this deleveraging is now behind the market, with hedge fund unwinding estimated at roughly 90% complete. The bank views this as a liquidity driven correction rather than a reflection of deteriorating corporate health.

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Are Samsung and SK Hynix Still Fundamentally Sound?

The earnings picture remains strong for both companies. SK Hynix reported record Q2 2026 revenue of 79.3 trillion won, a 257% increase compared to the same quarter last year, with operating profit reaching 60.5 trillion won and an operating margin of 76%. 

The results were driven by surging demand for high bandwidth memory used in AI data centres, alongside rising DRAM and NAND pricing. SK Hynix's earnings per share beat analyst expectations by over 85%, though revenue came in slightly below consensus.

Samsung Electronics posted preliminary Q2 2026 revenue of 171 trillion won and operating profit of 89.4 trillion won, marking a roughly 19 fold increase in operating profit compared to the same period last year and its third consecutive record quarter. 

Full results with divisional breakdowns are expected on 30 July 2026. 

Goldman Sachs has noted that South Korean semiconductor stocks trade at a forward price to earnings ratio of approximately 5x, well below historical averages and suggesting the market may be pricing in more downside than fundamentals warrant.

The broader investment thesis centres on the AI driven memory supercycle. Global cloud providers continue expanding AI data centre capacity, and memory chips remain in structural undersupply. 

JPMorgan's view is that once the technical selling pressure fades, market attention will return to corporate profitability and the trajectory of AI related capital expenditure.

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Conclusion

JPMorgan's call on Samsung and SK Hynix comes at a moment of extreme volatility in the Korean market, but the underlying logic is clear. 

The technical selling that drove the KOSPI lower is winding down, and the fundamental case for both chipmakers has not changed. Whether this marks the bottom is something only time will answer, but the data suggests the worst of the deleveraging may be behind. 

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FAQ

What Did JPMorgan Say about Samsung and SK Hynix?

JPMorgan said the leveraged ETF deleveraging in South Korea is nearing its end and that both stocks are positioned for a potential recovery.

Why Did the KOSPI Drop so Sharply in July 2026?

The decline was triggered by forced unwinding of leveraged ETF positions tied to Samsung and SK Hynix, which created cascading selling pressure across the broader market.

How Much Did SK Hynix Earn in Q2 2026?

SK Hynix reported record operating profit of 60.5 trillion won on revenue of 79.3 trillion won, with a 76% operating margin.

Are Korean Semiconductor Stocks Undervalued Right Now?

Goldman Sachs estimates Korean semiconductor stocks trade at a forward price to earnings ratio of approximately 5x, well below historical averages.

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