Harvard economist flags sustainability risks in Samsung, SK hynix AI rally

Samsung Electronics and SK hynix have surged to record stock highs on global demand for artificial intelligence chips, but Harvard University economist John Y. Campbell is warning investors that today's elevated valuations may deliver lower returns than the rally's momentum suggests.

The caution is relevant to Korean-American investors across Southern California's Orange County, where many community members hold positions in Korean technology equities or track the semiconductor sector as a proxy for the homeland economy.

The rally in Samsung Electronics and SK hynix shares is grounded in concrete demand: hyperscalers are racing to secure high-bandwidth memory chips to fuel expanding data centers, and geopolitical pressure on chip buyers to diversify supply chains away from Taiwan has added a strategic tailwind for South Korean manufacturers. "The Korean companies are in a good position to exploit that," Campbell told The Korea Times.

Campbell, who developed the cyclically adjusted price-to-earnings ratio — known as CAPE — said his decades of research point to a consistent historical pattern. "Historically, high prices relative to current earnings tend to go along with low subsequent returns," he said. "I'm not saying there's going to be a crash, but at today's prices, you should expect lower returns than you would have a year ago."

The economist flagged a structural challenge he believes distinguishes the AI sector from earlier technology waves. Unlike internet-era platforms that locked in users and achieved near-monopolistic dominance, AI providers face a market where users can shift between competing systems at minimal cost. "We have competing models and it seems to be very easy to switch among them," Campbell said.

Analysts and the Korea Capital Market Institute have also cited additional risks, including potential oversupply if major technology firms scale back AI infrastructure spending, and intensifying competition from Chinese manufacturers in lower-end memory segments, according to The Korea Times.

In a separate discussion, Campbell addressed themes from his 2025 book "Fixed," co-authored with Imperial College London professor Tarun Ramadorai, which examines structural inequities in consumer financial markets. Commenting on South Korea's jeonse rental deposit system, he said, "Ordinary people who want to rent an apartment are not in the business of evaluating credit risks."

Campbell also raised broad questions about artificial intelligence in personal finance. "The question is whether we can trust AI agents to give us good advice," he said. "There's a real issue about who the AI is working for."

Campbell made his remarks in an interview published by The Korea Times on May 10, ranging from semiconductor valuations to personal finance reform. His CAPE framework, developed over three decades of research, remains one of the most widely cited tools for assessing long-run equity market risk.