JPMorgan Chase's Asia-Pacific equity research team believes that the third-quarter earnings season for South Korea will officially kick off in the week of October 19th. The recent significant pullback in storage chip stocks is creating opportunities for medium-term buying, and the technology and financial sectors are expected to be the main determinants of success or failure during this earnings period.
According to the latest research report released on October 15 by analysts such as Jay Kwon from JPMorgan Chase, Samsung Electronics' preliminary results last week met expectations, LG electronics fell short of expectations, and LG new energy exceeded expectations. These three sets of precursor signals have set the tone for this round of performance period.
The report states that after visiting over a hundred investors in Asia, Jay Kwon pointed out that storage stocks have fallen by approximately 6% and 15% in the past month and three months respectively, while during the same period, the Philadelphia Semiconductor Index (SOX) has risen by about 10% and fallen by about 4% respectively. This divergence is providing favorable risk-return entry points for duration trading.
Affected by overnight inflation in the United States exceeding expectations, coupled with concerns about the valuation bubble in artificial intelligence, South Korea's stock market tumbled again. Chip giants Samsung Electronics and SK Hynix suffered particularly heavy losses. As of press time, both Samsung Electronics and SK Hynix have fallen by nearly 10%.
Why Storage Shares Have Become the Core of the List: Expectations for a Reset Season and Duration Trading Logic
Jay Kwon has visited over a hundred Asian investors in Singapore, Kuala Lumpur, and Hong Kong, China over the past two weeks. The research findings reveal a key discrepancy: there is a clear disconnect between the conclusions drawn from a top-down perspective on the sustainability of AI expenditures and those based on a bottom-up analysis of storage supply and demand fundamentals, with investors showing significant divergent sentiments.
JPMorgan Chase has previously characterized the third quarter as a “season of expectation reset,” and pointed out that storage stocks may continue to experience volatility in the short term due to the lack of immediate catalysts recently. On a data perspective, storage stocks have fallen by about 6% in the past month and by about 15% in the past three months, while during the same period, the Philadelphia Semiconductor Index has risen by about 10% and fallen by about 4%, respectively. This significant divergence in trends constitutes a stark contrast.
However, JPMorgan Chase believes that it is precisely this divergence in sentiment and price movements that provide a good entry point for 'duration trading.' Duration trading refers to betting on a medium-term logic of a 'longer and higher' storage upcycle. Jay Kwon indicates that from a medium-term perspective, the risk-reward ratio has turned favorable, and investors are advised to accumulate positions at lower levels during recent pullbacks.
Based on the above judgment, JPMorgan Chase has identified the core overweight targets for the next six months: Samsung Electronics and SK Hynix (main storage line), Kioxia (Kioxia) (storage), Samsung Electro-Mechanics (MLCC and substrates), ISU (AI PCB), and ISC (test sockets).
This combination covers the storage chips themselves as well as their upstream and downstream supporting components, reflecting JPMorgan Chase's systematic approach to the mid-term recovery of the entire storage industry chain, rather than focusing on just one link.
Validation conditions for establishment of judgment and failure boundaries
JPMorgan Chase also provided a verification framework for the aforementioned judgment.
At the result level, it is necessary to observe whether the profitability of the technology and life insurance sectors, which will be released gradually starting from the week of October 19th, is superior to that of the industries listed as negative. At the mechanism level, whether marginal changes in spot storage prices, AI related orders, and capital expenditures can support the judgment of a 'longer upward cycle' will be key tracking indicators.
The same argument is made that the counter-evidence is also clear: if storage supply and demand continue to weaken, if catalysts remain absent, or if there is a widespread downward revision of performance during the reporting period, JPMorgan Chase indicates that it will need to renege on the aforementioned judgment. The verification period is from October 19, 2026, to the beginning of November 2026, during the performance reporting period.
