Shares of Samsung Electronics and SK Hynix are swinging again amid a debate over the profitability of artificial intelligence (AI) investment. The doubt over the sustainability of AI infrastructure spending is growing as the free cash flow (FCF) of U.S. big tech companies has turned negative and shareholder returns have been cut. South Korean brokerages are split between the view that it is too early to conclude that worsening cash flow signals weakening AI demand and the view that volatility will persist for the time being.

The most direct trigger was the third-quarter earnings of major U.S. technology companies. At Alphabet, Amazon, Meta and others—all except Microsoft—cash flow deteriorated far more than expected as the cost of building AI data centers surged. Microsoft raised funds by issuing $25 billion in corporate bonds, its first such sale in nine years. The market is treating these cash-flow trends as a key gauge of whether the AI investment cycle can be sustained.

The cash flow of the five biggest U.S. big tech companies (Microsoft, Alphabet, Amazon, Meta and Oracle) totaled $542.9 billion in January-September this year, up 29% from a year earlier and a record high. Over the same period, however, their shareholder return ratio—dividends plus share buybacks—fell to 9.3%, about one-third of the 27.4% a year earlier. Buybacks plunged 83%, from $81.8 billion to $13.6 billion. Alphabet and Meta bought $66.5 billion of stock last year but did not repurchase a single share this year.

CategoryJan-Sep 2025Jan-Sep 2026Cash flow of five big tech companies$420.8 billion$542.9 billionShareholder return ratio27.4%9.3%Share buybacks$81.8 billion$13.6 billionDividends$33.9 billion$37 billionCapital expenditure (CapEx)approximately $278.5 billion$556.9 billion

Note: 2025 capital expenditure is an estimate back-calculated from reports that it was about double the 2026 level.

Capital expenditure nearly doubled to $556.9 billion. It was the first time since record-keeping began in 2011 that generated cash flow fell short of capital spending. Combined FCF for the five companies was a $14 billion deficit, a complete reversal from a $143.5 billion surplus a year earlier.

The trend immediately spilled over into sentiment toward South Korean semiconductor stocks. According to Korea Exchange data, retail investors net sold 1.7411 trillion won (approximately $1.3 billion) of SK Hynix and 1.227 trillion won (approximately $913.1 million) of Samsung Electronics on the main KOSPI market from Oct. 19-30. That ranked as the two largest retail net sales. It was the exact opposite of Oct. 1-18, just two weeks earlier, when retail investors net bought 4.2991 trillion won (approximately $3.2 billion) of Samsung Electronics and 1.8093 trillion won (approximately $1.3 billion) of SK Hynix, propping up the index. Over the same period, foreign investors sold nearly 14 trillion won (approximately $10.4 billion) of the two stocks combined.

The prevailing interpretation is that the exit of retail money stemmed from doubts about the durability of the AI investment cycle rather than from earnings themselves. Meta’s FCF turned negative due to expanded capital spending, and Tesla cut its annual investment plan. Alphabet reported revenue below market expectations and saw its shares plunge more than 12% as the burden of AI investment costs came into focus. Amazon’s forward 12-month FCF was estimated at negative $42.4 billion. Intel also warned that its FCF could turn negative in 2027, and its shares fell about 29%.

South Korean brokerages, however, are divided. Seo Jung-hoon, an analyst at Samsung Securities, said, “The cost burden of AI investment has grown, but the demand to support it and the capacity to raise funds remain solid,” adding, “Current market concerns over AI-related stocks are somewhat exaggerated.” Indeed, Alphabet’s cloud revenue more than doubled from a year earlier, and Amazon Web Services (AWS) posted growth approaching 40%. Alphabet successfully raised $85 billion in a share sale in June, and Microsoft also sold corporate bonds at yields below the investment-grade average.

Koh Young-min, an analyst at Korea Investment & Securities, believes the latest earnings actually reaffirmed the companies’ commitment to continued investment. “At big tech companies other than Microsoft, the negative FCF widened from before, but they all say the same thing—that they will keep investing,” he said. “Contrary to concerns, these results once again showed that we are clearly not yet at the threshold where their investment should be a real worry.” On the memory demand side, he said Samsung Electronics and SK Hynix are discussing additional concrete demand through 2029-2030 and that their output is effectively sold out.

Semiconductor industry indicators also point in a different direction from the concerns. October exports, announced on Nov. 1, totaled $115.3 billion, up 93.7% from a year earlier, with semiconductor exports surging 259.4% to $56.4 billion. Some say the KOSPI’s forward 12-month price-to-earnings (PER) ratio has fallen to 4.1 times, entering historically undervalued territory.

Investors are also noting that South Korean companies’ shareholder return moves are the opposite of U.S. big tech’s. Samsung Electronics is applying a policy of spending 50% of cumulative FCF for 2024-2026 on shareholder returns, while SK Hynix maintains a policy of returning more than 50% of cumulative FCF for 2025-2027. On that basis, the two companies have pledged a combined 210 trillion won (approximately $156.3 billion) in shareholder returns this year. Samsung Electronics’ 110 trillion won (approximately $81.9 billion) is more than five times its previous record of 20.3 trillion won (approximately $15.1 billion) in 2020, and SK Hynix’s 100 trillion won (approximately $74.4 billion) is nearly seven times its 14.3 trillion won (approximately $10.6 billion) in 2025. The two companies’ capital spending burden is also lighter than that of U.S. big tech. Samsung Electronics’ expected capital expenditure this year is 84.4 trillion won (approximately $62.8 billion), and SK Hynix’s expected annual capital expenditure next year is up to 50 trillion won (approximately $37.2 billion).

Kim Jang-yeol, head of the research center at Unistory Asset Management, believes the way out of the volatility ultimately depends on earnings. “If semiconductor earnings in the fourth quarter of this year and the first and second quarters of next year continue to beat market expectations, the mood could shift toward ‘AI demand is stronger than expected’ rather than the negative scenario,” he said. “In the end, we have to wait until we see the earnings.” He added, “It is important for AI model companies like Anthropic to show how strong actual demand is,” but also said, “Until doubts about demand are fully resolved, the battle with time and noise may continue.”

The market’s next milestone is the U.S. midterm elections on Nov. 3. Korea Investment & Securities believes that, with the four-month stock correction since July having largely unwound crowding and excessive expectations, easing political uncertainty could be a catalyst for a rebound. The analysis is that the pattern resembles late 2024 to early 2025, when a buildup of selling was followed by a rebound driven by favorable memory prices and the removal of uncertainty after the U.S. presidential election.