In a high-leverage market, a good financial report may be like Viagra — once the effect wears off, it will still go soft.

Today I saw a discussion among some friends saying that there is no need to worry about the decline in semiconductors; as long as the financial reports can continue to report good news, stock prices will definitely rise. I do not fully agree with this viewpoint, so let me explain my reasons.

First of all, financial reports are indeed very important.

Because without performance support, it is difficult for the market to sustain long-term growth. Especially in this round of AI, semiconductors, and storage-related stocks in Korea, their rise to the current position is definitely supported by industry cycles and profit increments.

However, a good financial report does not mean that stock prices will continue to rise.

In the short term, stock prices are not only determined by the financial reports themselves but also by how much prices have already risen, how high market expectations are, how much the financing has increased, and how much leverage ETFs have piled up.

Samsung is a direct example of this.

In Q2, the operating profit forecast was nearly a 19-fold increase year-on-year, which is already very exaggerated, but Samsung and SK Hynix still saw significant declines, and KOSPI even triggered a temporary suspension. The reason is that the market is not only looking at how much money the company made this quarter but also whether AI and storage can continue to maintain growth after this cycle.

NVIDIA also experienced a similar situation this year. In February, the financial report was good, with revenue and profits exceeding expectations, but the stock price still fell by 4%. At that time, the market was more concerned about when AI investment returns would materialize, whether competition would intensify, and whether future growth could continue to be sustained.

In May, NVIDIA once again provided higher-than-expected revenue guidance and announced an $80 billion buyback, but the stock price still fell by 1.6% after hours. This shows that at the high expectation stage, simply being “good” is no longer enough; the market needs to see stronger, further, and more certain growth.

Meta is the same. Revenue growth in Q1 was decent, and the profit margin was acceptable, but after the company raised its 2026 capital expenditure expectations again, the stock price still plummeted. Investors were concerned that the pace of spending on AI was too fast, while profitability was not yet clear.

So financial reports are the fundamentals, while stock prices are determined by expectations and financial input.

If the financial report is good, the stock price position is not high, and leverage is not heavy, then it could certainly rise further. However, if the previous surge relied heavily on financing and leverage ETFs, once the financial report comes out and does not significantly exceed expectations, it can easily turn into a reason for profit-taking.

This is also the aspect that the Korean market needs to pay the most attention to right now.

This round of rise has both spot buying and financing positions, leverage ETFs, and a large amount of chasing funds. During the rising phase, this money will push the market higher, but once it reaches a high point, as soon as the trend starts to fluctuate, leveraged funds will also become very sensitive.

However, a financial report can only address whether the company is making money; it cannot resolve whether the stock price has increased too much in the past, whether market expectations have been overly inflated, and whether new money is willing to continue to buy in.

If the stock price position is not high and leverage is not heavy, a good financial report may continue to drive the rise. But if the previous surge relied on financing and leverage ETFs, once the financial report comes out and does not significantly exceed expectations, it can easily turn into a reason for profit-taking.

Therefore, when looking at Korean semiconductors now, I think we cannot only focus on whether the financial report can continue to report good news.

A good financial report is certainly useful, but it is also important to see whether there has been an excessive prior increase. The fundamentals of Samsung and SK Hynix have not suddenly deteriorated; the issue is that they rose too quickly, and the financing positions and leverage ETFs have piled up too high. In this situation, the market needs more than just a good financial report; it requires stronger outperformance along with new funds to continue buying in.

If there is no further support, a good financial report could become a reason for profit-taking.

This is very similar to how positive news in the crypto space can play out. The good news is real, but the price may have already reacted in advance.

Therefore, I think that for Korean semiconductors going forward, it is necessary to look not only at the financial reports but also at expectations, positions, and leverage. Company profitability is crucial, but whether the stock can continue to rise also depends on whether there is new money in the market willing to continue buying.

In a high-leverage market, a good financial report may be like Viagra; it can excite the market temporarily but does not resolve issues of excessive expectations, high leverage, and a lack of buyers afterward. Once the effect wears off, the funds that need to be realized will still be realized, the funds that need to reduce leverage will still reduce leverage, and what needs to soften will still soften.

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