Fund managers returning to South Korean memory chip stocks faced renewed caution after DeepSeek’s latest AI model raised doubts about near-term semiconductor demand. Samsung Electronics Co. and SK Hynix Inc. shares fell over 3% each Friday, reversing part of their July rebound. DeepSeek noted it reduced high-bandwidth memory needs in its models, adding to tech sector worries alongside fears of U.S. rate hikes.

Earlier optimism had stemmed from strong Big Tech spending, cheap valuations, solid earnings, and shareholder returns. Ha Seok Keun of Eugene Asset Management warned the DeepSeek development could stoke near-term demand concerns, though he added that new models from Meta and OpenAI would likely boost actual AI usage and chip demand more significantly. Local retail traders had earlier driven a feverish rally in Samsung and SK Hynix before exiting leveraged ETFs, selling over $10 billion in the two stocks this month.

Foreign funds, previously net sellers, are returning as retail-driven swings lessen. Isaac Thong of Aberdeen Asian Income Fund in Singapore said Korean memory stocks remain cheap, trading at 2.7x and 5x book value for Samsung and SK Hynix—far below the Philadelphia Semiconductor Index’s 11x—and at ~4x forward earnings versus 19x for global peers. Despite being over 25% below all-time highs, volatility remains high, with daily moves of 5% or more still common.

Matthew Tuttle of Tuttle Capital Management noted investors can get similar returns with less volatility elsewhere. Jung In Yun of Fibonacci Asset Management Global said foreign investors may return if volatility drops significantly, adding that DeepSeek’s impact may be sentiment-driven rather than a lasting selloff, and that cheaper AI could ultimately increase usage and offset efficiency gains.