Chesley Morning Brief: July 31 Friday – Semiconductors Surge and Key Stock Analyses
Fund Managers' Daily Morning Investment Meeting Live | Park Se-ik Senior Managing Director & Chesley Investment Advisory [Morning Brief / 26.07.31.Fri]
Speakers
Oh Gwa-jang
— Analyst
Choi Ho
— Vice President
Park Se-ik
— CEO, ex-Chief Strategist
Wang Sun-yang
— Director, China Market
Summary
The July 31 Chesley Morning Brief covers the overnight US market surge led by semiconductors, driven by the unwinding of leverage and Chairman Chey's SK hynix purchase. The team analyzes key Q2 earnings from Amazon (strong cloud) and Apple (soft), then dives into Korean large-caps Samsung Electronics (positive conference call, dividend hints) and Samsung Electro-Mechanics (massive MLCC upcycle valuation gap). BYD is also highlighted for its sales recovery and high overseas margins. The overall message is that forced deleveraging is ending, and focus should return to strong semiconductor fundamentals.
- US markets rebounded sharply; Philadelphia Semiconductor Index surged 8.2% amid short-covering and deleveraging.
- Chairman Chey’s first SK hynix purchase and the liquidation of a leveraged AI hedge fund acted as key positive catalysts.
- JP Morgan data suggests 85% of semiconductor ETF excess leverage has been unwound; short interest is at extreme levels.
- Amazon reported excellent AWS results (revenue +37% YoY, operating margin 39.3%), confirming AI investment returns.
- Apple missed on Services revenue and flagged memory cost headwinds; the stock is viewed as unattractive.
- Samsung Electronics guided for memory supply shortage through 2028 and hinted at a special shareholder return.
- Samsung Electro-Mechanics is deeply undervalued on a sum-of-parts basis (50%+ upside) as MLCC pricing and demand inflect.
- BYD’s June sales recovered strongly, and high overseas margins make the stock compelling at 18x P/E with ~30% target upside.
Ideas
Sales recovery, high overseas margins, 30% upside.
BYD's Q1 sales and profits fell, but June sales recovered to 400,000 units (+5.5% YoY), with exports hitting a record 180,000 units. The overseas business enjoys much higher margins (GP margin 27% vs. 18.6% domestic, vehicle margin ¥20,000 vs. ¥5,800) because competition is fiercer in China while BYD dominates Chinese EV exports abroad. Dongbang Securities maintains a BUY rating with a target of ¥125, implying 30% upside from the current ¥94.8. The seasonal upswing and new model launches are expected to sustain the recovery into H2, making the stock attractively valued at PER 18.3x with ROE near 17%.
Insider buy, deleveraging done, memory shortage.
SK hynix shares plunged over 50% from highs on forced deleveraging, but Chairman Chey Tae-won made his first-ever open-market purchase of ¥4.78 billion worth, signaling strong confidence in the memory upcycle. The liquidation of Leopold Aschenbrenner’s leveraged AI hedge fund removed a major overhang, triggering a sharp short-covering rally in the ADR (+17%). JP Morgan notes that 85% of the leverage ETF deleveraging in memory is already done, while DRAM contract prices keep rising and hyperscaler capex for 2026–27 keeps being revised up. This combination suggests the rebound has strong fundamental backing.
Deleveraging done, extreme short interest, rally ahead.
JP Morgan data shows that 85% of the excess leverage in semiconductor ETFs has already been unwound, and short interest in the SMH (VanEck Semiconductor ETF) and a dedicated DRAM ETF has surged to the highest in 1.5 years, indicating heavy hedging/shorting. With the deleveraging cycle largely complete and memory fundamentals (DRAM prices, hyperscaler capex) still strengthening, a short-covering rally is very likely. The report concludes that the recent extreme volatility was driven by forced liquidations, not deteriorating fundamentals, setting the stage for a sustained recovery in the semiconductor sector.
AWS revenue surges, margins expand sharply.
Amazon delivered a strong quarter, with AWS revenue growing 36.8% YoY to $42.2 billion (beating consensus) and AWS operating income surging 63% YoY to $16.6 billion. The AWS operating margin hit a record 39.3%, well above consensus, driven by efficiency gains, server optimization, and fixed-cost management. Amazon also raised its 2026 capex guidance from $200B to $220B, partly to meet surging cloud demand, and indicated that 2027 capacity is already mostly booked. The market cheered this as proof that AI/cloud investments are generating real returns, sending the stock up nearly 10% after hours.
Services miss, memory costs hurting, valuation high.
Apple reported strong product sales, but the closely watched Services revenue missed expectations, and management highlighted that memory cost inflation will increasingly pressure margins through the September quarter and beyond. With the stock already trading at the highest P/E of the past year (~30x) and no clear EPS upgrade catalyst, the risk/reward looks unattractive. The after-hours 6–8% drop confirmed the market’s disappointment.
Supply shortage into 2028, special dividend catalyst.
Samsung Electronics’ Q2 conference call was described as the best in recent memory. The company revealed that DRAM and NAND ASPs rose far more than expected, and it guided for further bit growth in Q3. Critically, management said the memory supply shortage will persist through 2028—and possibly into 2029—with long-term supply agreements already covering up to 70% of capacity. On the shareholder-return front, Samsung strongly hinted at a special dividend/buyback at the end of its three-year policy period, stating it will ‘repay shareholders with good results soon.’ Consensus earnings estimates continue to be raised, and the stock is viewed as attractively priced after the recent max drawdown.
MLCC upcycle drives huge valuation upside.
Samsung Electro-Mechanics reported strong Q2 results, beating even raised consensus on revenue and operating profit, driven by a mix shift toward high-end MLCCs for servers and automotive. Analyst estimates for the MLCC business have been aggressively upgraded, with revenue now seen at KRW 9.1T in 2026 (up from KRW 7.3T). By modeling a 50% MLCC price increase from current levels (to KRW 7.5 per unit) and a 95% utilization rate, and adding the package-substrate business, the sum-of-parts suggests a market cap of KRW 100–110T versus the current KRW 65T, implying 50–70% upside. The stock sold off 14% on the day of the good results due to ETF deleveraging, creating a significant valuation disconnect.
Up Next
This Chesley Investment Advisory (체슬리투자자문) video, published July 31, 2026, features Oh Gwa-jang, Choi Ho discussing 1211.HK, 000660.KS, SMH, AMZN, AAPL, 005930.KS, 028260.KS. 7 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Oh Gwa-jang, Choi Ho · Tickers: 1211.HK, 000660.KS, SMH, AMZN, AAPL, 005930.KS, 028260.KS