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yes. This is Time in the Economy. We are joined today by economic commentator Jeong Cheol-jin. Welcome. Yes, hello. Uh, first of all, it looks like the KOSPI is rising by about 3% today . Yes, that is correct. Intel plummeted massively on the US stock market last Friday. With the Intel shock, is n't our stock market going to turn into a Black Monday today as well?
Investors were very worried over the weekend, but things are fine now. Why is this happening? I always stab the stock market in the back. yes . As you said, I'll be staying up late on the weekend. There were really a lot of these individual investments. I’ll talk about it a little later, but the New York stock market looked really bad on Friday.
Well, there was a plunge of nearly 30% for Intel, and even the big tech companies we trusted continued to struggle . Looking at today's supply and demand alone, foreigners are selling again today . If you look at the financial investment lines captured in the institutional sector during the early market session, individual investors are indeed using ETFs.
These days, are n't many individuals investing in ETFs using their retirement pensions, such as ISRPs? That volume came in quite a bit in the form of buying at the lows or bottoming out, and looking at other corporations, SK Hynix started buying back 250,000 shares starting the very next day after announcing that it would implement a shareholder protection policy .
So, with share buybacks also being recorded, looking at the big picture, there is n't anything particularly distinct in terms of fundamental factors, but this kind of phenomenon is emerging in terms of supply and demand . To add one more thing, we also experienced a significant drop on Friday when U.S.
market futures had already fallen. And since Intel's poor guidance for the next quarter was already somewhat priced in at that time, I assess that today's rebound occurred because the KOSPI had already factored this in a bit last Friday . Uh, looking back at last October. The KOSPI fell by 16% overall .
Well, as you mentioned, it is rising today, but it seems to be due to supply and demand factors, and the overall caution in the market remains unchanged. And I heard that foreigners are selling again today, so I wonder when they will return, right? Now, I think there are two ways to interpret this. The first is that we are selling nearly 240 trillion won this year alone .
yes. The reason the Korean stock market was met with such a scoff was mechanical selling. So, the proportion of foreigners regarding Korea has averaged between 33% and 35% over the past 15 years or so. The proportion. yes. When the ESPO for the entire KOSPI and the Korean stock market went up to 7,000, 8,000, or 9,000, the market was at 40% or 41%, so they said there was no choice but to sell .
Even when we sold 100 trillion or 120 trillion won, they just accepted it. You sold a lot, 240 points. But the proportion is still 37%. Oh, really? yes. So, looking at it from the perspective of mechanical selling, when does it enter the 33 to 35% band? When the 5,100 and 5,000 levels are slightly broken, foreign investors will return to their historical average weighting.
So, unfortunately, paradoxically, I think it will be difficult to expect consistent net buying from foreign investors until then . Second, if it were attractive enough to outweigh such mechanical selling and rebalancing, honestly, foreigners would come in as well . However, since our stock market is dominated by Samsung Electronics, SK Hynix, and the so-called "S7" (the former SK Hynix group), the core of the ongoing controversy regarding AI profitability lies in memory semiconductors.
So, even though it earned 107 trillion won in three months, Samsung Electronics is projected to be the world's number one in total annual operating profit next year . Even if you appeal with this, this level of charm isn't enough; it seems you need charm that can surpass it . Well, [snorting] I think the controversy over profitability needs to disappear.
Also, regarding the AI profitability controversy, and our stock market, various governance reforms and things like that need to be done. It needs to be done . You need to be more proactive . yes . Since you mentioned the controversy regarding the profitability and AI investigation-style nature of this, people say it's fine, then just when you're about to forget about it, it pops up again, then it goes up again saying it's okay, and then it explodes once more—this cycle keeps repeating right now.
And seeing Intel crash on Friday was really scary. It's pretty much like that . It is the largest drop since the 5-day shock of 1974, and the largest drop in the US in 52 years. yes . I don't think I've ever seen a stock drop this big in the U.S. stock market . But well, if you do things like chasing skyrocketing stocks that MGs do a lot these days, [laughs] some stocks go up 100% or 120% in a day, and there are some that fall even more than that, but the problem is that it was Intel, so now it's big.
But strictly speaking, a big company called Intel plummeted by 30%. While this is nerve-wracking and frightening, Intel is not a key member in the recent controversy surrounding AI profitability . yes. To break it down broadly, there are hyperscalers like Google, Amazon, Microsoft, and Meta . On the other side, there are semiconductor and AI companies such as Nvidia, TSMC, SK Hynix, and Micron.
Given this triangular structure involving these two, and considering that Apple—a Big Tech company—is not exactly aggressive in its AI investments despite not having AI embedded in its products, as for Intel, well, to be honest, is n't it primarily a CPU manufacturer? So, while it does n't fit in anywhere in this new landscape, the Yen, which is practically being pushed by the Trump administration, has garnered a lot of attention as Intel has collapsed.
When I looked into why it collapsed, well, the performance this quarter was decent, but there was a slight miscalculation in the earnings forecast for the next quarter . And then, during the conference call there, is n't there the PC market right now? Now, since it is an Intel CPU, even if we look only at the PC sector, memory semiconductor prices have risen so much that it looks like performance will be quite sluggish from the next quarter onwards .
Actually, don't people really talk a lot these days about how they can't buy a laptop because they're too expensive ? Now, with this coming out, the next big thing was the earnings miss and the drop in stock price. But thinking about it carefully, ultimately, we were blaming the memory semiconductors, weren't we?
Yeah, yeah. You're blaming the memory, are n't you? Coincidentally, Apple is releasing its earnings again this week, and for the past month or two, they have actually been blaming memory for what they call "job inflation ." yes. Consequently, it seems Intel has destroyed overall investor sentiment toward AI, raising concerns that the damage is now extending to memory semiconductors and even AI chips—which were previously considered the last remaining sanctuary, as Big Tech companies have always spent money to purchase our chips .
Ah, I heard there were stories like that as well. Big tech companies have been taking on debt to keep investing, you know. Because to survive in the AI competition, they have to gain a head start, so they have no choice but to keep investing by taking on debt to compete. However, Alphabet plummeted after its earnings announcement last week, and there is now a negative outlook for Meta's credit rating .
yes . So, is Wall Street viewing this as Big Tech companies now joining the ranks of those investing with borrowed money ? Ah, so I find this a bit frustrating. If you look at it this way, consider companies like Google or Amazon, the earnings reports released by Meta this time, and the free cash flow issue that is being talked about the most, isn't it?
Now, free cash flow is the money left over after investing everything needed from the earnings, but since it has been negative for two consecutive quarters, people are saying, " Ah, AI profitability is low now, people do n't have any money." Then it's dangerous from now on. It’s a setup where they’ve removed the whole thing, saying they won’t buy the memory chip, but personally, looking at it, there are Core, Yebius, Airen, and even the Cloud we’re talking about, there are two of them.
One is the established cloud service Amazon and Google Meta, and the other is Neo Cloud, which is newly entering the GPU rental business. It is being divided into these two, but this side looks a bit risky . yes. This side looks risky, and it is true that the situation is quite difficult unless companies like Entropic or OpenAI go public quickly to make money.
However, regarding the upstream players like Google, Meta, and Amazon, do n't you think there is still a chance to give them a little more leeway? In fact, looking at the recent earnings announcement, there was quite significant revenue growth and profitability expansion in the cloud sector. But this time, both Google and Amazon did the same.
The reason I excluded them is that while they are making money in the cloud sector where AI is needed, their usual strong area, such as Google search ads, stumbled a bit . In the case of Amazon, they keep stumbling in the businesses they were originally good at, so if you think about it, once they leave AI B, people won't look at Google anymore, right?
Nowadays, people don't even watch YouTube anymore; they just go straight to searching for Choi Chi-T, do they ? I do think it's a bit excessive to have it come to that point . So perhaps, if the uncertainty surrounding the Iran war and the midterm elections is resolved to some extent, these original hyperscalers and Big Tech companies might be able to recover, and their stock prices will likely rebound as well .
However, regarding the Neo Cloud part, I do admit that time is actually very tight . yes . Well, since Big Tech companies are large corporations, there is n't really much to worry about, but you are saying you are a bit uneasy about the newly emerging companies in the AI market . How about that entropic?
The Nasdaq rose significantly last week after Entropy announced its listing plans . And in doing so, what emerged from Wall Street was that the profitability of AI has been proven. I think there were discussions like that, but now the profitability of AI is becoming an issue again, and Entropic could receive a junk rating—that is, a non-investment grade rating.
It's Entropy stock after the listing. I also... because of this news over the weekend, what I'm talking about is that there is a company called Entropy, you know . Claude is another one that creates the LM Choi GPT we mentioned, so you can think of it that way. There's also Open AI, you know. OpenAI is now the latest GPT, but the ultimate question regarding the profitability of all AI right now is: who is supposed to make the money ?
Right away, since GPT has gained many paid customers, I also have to pay $100 a month to use all the paid services . The controversy over the profitability of AI will only end when Entropic uses a lot of Claude and now offers many paid services so that they go outside and earn money . Because Nvidia is making a profit by selling saliva .
This is what I mean by circular trading. You invest, and then use that money to buy back your own business, right? I mean, everyone who knows this structure is aware of it . To put it simply, we individuals are n't just going to keep paying for cloud services on our own, are we? Companies do it. you're right.
Now, places like OpenAI, Ankle AI, and Entropy are using it more, and there needs to be more companies like that. The part about breathing a sigh of relief mentioned by Encode is that, honestly, I thought Entropy's listing would be postponed as well. OpenAI postponed it. Then this is going to be a really big deal.
There is already a lot of controversy surrounding the profitability of AI, and they said they couldn't even do an IPO, but since they said they will do it in November, after the midterm elections, I see it as a relief . This time, the place called Black Rock is good. But I think we can go public. However, after the IPO, I looked into Entropic's value—which I consider a blacklisted move—and in terms of corporate credit ratings, it is close to speculative grade .
Why would it be speculation? I had concluded that Entropy wouldn't be able to come and make money . So, this part takes a little time and requires a lot of thought . yes. hmm. You have just mentioned circular trading, and as AI semiconductor, big tech, and cloud companies become mutual customers in a cycle, investment funds are drying up among these companies.
It's like this . So, I've actually heard talk that corporate bond interest rates are skyrocketing. If a corporate bond yield of 17% at places like Oracle Meta is arguably very expensive, isn't it? It means we have to pay high interest to raise money for them. It is a designated company. I have to throw in a CDS, but it comes with almost 100P .
So, the point is that to be safe with the original company, you have to pay an additional 1% . In the case of Oracle, it is over 400p. I think you need to pay an additional 4% to safely store that company, and for NeoCloud like Cowave that I mentioned earlier, you need to add 1,000 BP. So, practically speaking, in the market, people keep thinking, "These are decent, but they need to make money quickly.
Who should be making money?" OpenAI needs to go quickly and make money, and Entropic needs to make money. However, even though many of you use Choi Ji-bi T as much as we thought, the number of active customers is n't that high. Another point is that people often compare this to gyms, but with a gym membership, you buy it and don't go.
Isn't Healthcrop making money now because of the people who don't go ? But regarding things like Choi Ji-T or this entropy paradox, many people use it. The token cost increases when you use more . Then, because of these people, you end up incurring higher costs and investments. Since this is a structure on a completely different level from so-called fixed-price subscriptions, even in the case of BlackRock, where costs are high, the more customers you meet—especially those who use the service diligently—the more you have to invest.
Do you think you can actually make a profit under these circumstances? I think that's probably why they ate junk like this . The fact that corporate bond yields and interest rates have risen so high is actually [snor] something we should interpret as meaning that those with money in the market are watching the current atmosphere of AI investment with a bit of caution.
Then, for the time being, our investors will need to keep a cautious eye on the market. Uh, first of all, the midterm elections are something we need to keep an eye on going forward, right ? yes. Actually, the war needs to end quickly once the midterm elections are over. The midterm elections and the war are intertwined like this.
If we look at these two things separately, war is a significant systemic risk, and while I am unsure how President Trump will make his decision, I previously stated that there were no catalysts for today's rebound in the domestic stock market other than specific supply and demand. However, if I were to add one factor, it would be the somewhat taco-like pattern, which is why oil prices have dropped quite a bit.
And because Pakistan and its allies have put in so much effort, reports have emerged that Iran feels it has done everything it can and is waiting for a decision from the U.S. As a result, there is an expectation that Trump might finally crack down on them, so the war ultimately boils down to whether or not there is an all-out attack on Iran .
The midterm elections actually do clearly have the aspect of resolving uncertainty . However, if a "Blue Wave" as predicted by the market materializes—where the Democratic Party gains control of both the House and the Senate—it is not a favorable scenario for the AI industry, particularly for South Korea's memory semiconductor sector.
Oh yes. With President Obama and the Democratic Party taking the lead, former President Obama is stepping forward, and attacking AI is becoming a key factor in voter sentiment . Especially in the case of AI data centers, the structure is such that those looking to make money need to operate quickly so that relative efficiency increases, which lowers the overall token cost of AI and thus activates the market.
However, AI data centers are electricity guzzlers. It's another hippo that drinks water. The noise is loud, too. So, in the case of the Democratic Party, let's take this a bit slower. Let's regulate AI data centers as well. Given this context, personally, rather than a "Blue Wave," if the structure is set with the Democratic Party in the House and the Republican Party in the Senate, would n't it be possible to push forward with the AI industry and AI data center sectors that the U.S.
has been developing? I think this kind of structure might be more favorable for those who are sensitive to it, especially if we look at it from a different perspective; in any case, it is meaningful in terms of resolving uncertainty . Now, it turns out that the Democratic Party's progressive base in the US is quite critical of data centers and AI, which is a complete [sneer].
yes. All right. Let me briefly talk about our exports as well . Uh, first of all, while the stock market continues to be sluggish, our export performance can only be described as a super boom. Looking at the data released by the Ministry of Trade, Industry and Energy yesterday, October exports were $115.28 billion.
We have prepared our own data for now. It was $121.1 billion in September. It exceeded $10 billion for two consecutive months . If things continue as they are, annual exports are certain to surpass $1 trillion within two months . I heard that it ranks fourth in the world, following China, the US, and Germany .
But semiconductors are the main drivers, and also, exports of 18 out of the top 20 items all increased. So, if you look at the breakdown by item, semiconductors increased by 259%. It is overwhelming. But computers are amazing, too. Cosmetics also increased by 496% and 57%, and automobiles, which had been poor recently, increased by 18% last month .
However, when I listen to economic experts and professors in the field, they say that if you exclude semiconductors, the perceived economic conditions in the manufacturing sector are very bad. yes. How much is it actually? That's right . I attempted the $1 trillion challenge last year, but it didn't work out.
Unfortunately. But looking at this year, it seems like a decision will be reached within November. If we see another $100 million level in November, we will be moving on to the third and fourth trillion mark. As Encord pointed out, looking only at the face value, it looks good. Wow, we are being asked to become the fourth country in the world to achieve $ 1 trillion in exports, and semiconductors accounted for half of that 49%.
So, to put it another way, it also implies that if the semiconductor sector falters even slightly or makes a mistake, there are no other universities to rely on . It stands out now because of semiconductors, but the manufacturing sector itself is actually entering a considerably difficult phase. If you look at the stock prices of shipbuilding, steel, and chemicals these days, don't you think you can see the current status of K-Shipbuilding, K-Steel, and K-Chemical ?
That is why such paradoxes coexist, and if we look beyond exports to domestic consumption, we encounter issues that are truly on a different level. Viewers are likely well aware of the state of the domestic economy, but for that reason, while the semiconductor industry is still alive, we bear the responsibility to leverage this momentum to invest elsewhere, increase employment, and turn on other engines .
And now, while $1 trillion is really great, I only looked at the semiconductor sector. But in September, the semiconductor export value X was 60.3 billion dollars. [Snoring] So, regarding the slight dip, October exports were indeed the highest in terms of the scale itself, but didn't October drop slightly compared to the peak in semiconductor exports in September?
There is currently a huge debate regarding whether memory semiconductors have reached their peak or not. I believe that semiconductor export figures and their growth rates will actually help determine the outcome of all of this, but this is a bit of a concern. Of course, now regarding seasonal factors , since the exchange rate is received in dollars, yes, because the price was evaluated in dollars, it is $60.3 billion.
Yes, regarding the statement that it decreased by $5.4 billion, let's take another look at November. However, it would be fine if semiconductor exports reached $60 billion again in November, but if this drops from $56.4 billion this year to the low $50 billion range, I honestly don't want to believe it, but we also need to question the theory that memory has peaked .
We will have to keep an eye on the trends in semiconductor exports as well . yes. Ah, thank you for your words today, critic.
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