The logo of Samsung Electronics is seen at its booth during the 26th Semiconductor Exhibition 2024 at COEX, Seoul, Oct. 23. Reuters-Yonhap

Samsung Electronics' stock was once the crown jewel of Korea, growing alongside the country's economic development. Domestic retail investors believed that, while it might take time, investing in the company would ultimately yield returns even in a bearish market.

Yet, Samsung Electronics' share price has been in a continuous downward trend since peaking at 88,800 won ($61.06) on July 11, plunging to the 54,000 won-level on Tuesday. The announcement of a $4.75-billion grant under the U.S. CHIPS Act provided a slight rebound earlier this week, but the stock shows no signs of anticipated long-term recovery.

The gloomy outlook is most evident in the exodus of foreign capital. Since the beginning of this year, foreign investors have net sold 10.4 trillion won in Samsung Electronics. This figure represents 96 percent of the total trading volume — a significant selling spree even in the context of recent economic challenges after martial law.

Observers largely attribute Samsung's weak performance to the broader downturn in the chipmaking sector. Despite enjoying a competitive edge in DRAM memory chips for decades, Samsung has been hit hard by an oversupply that continues to drive prices downward.

Simultaneously, the rapid rise of artificial intelligence, or AI, has fueled demand for high-bandwidth memory (HBM) chips. Samsung, caught off-guard by this trend, lagged in HBM development, allowing rival SK hynix to secure a virtual monopoly in supplying these specialized chips to Nvidia.

"The operating environment in the fourth quarter is assessed to have been largely unfavorable," IBK Securities analyst Kim Un-ho said. "The semiconductor division is estimated to have faced weaknesses in both the memory and nonmemory segments."

Workers walk by a Samsung Electronics' chip production plant in Pyeongtaek, Gyeonggi Province, in this September 2022 photo. Reuters-Yonhap

The downturn is hardly new. On Nov. 14, Samsung's stock slipped to a four-year low, pushing management to announce a 10-trillion won share-buyback plan. Even before that, on Oct. 8, its third-quarter operating profit fell short of estimates, prompting an unusual public apology from the company's leadership.

Looking ahead to 2025, the outlook remains similarly uncertain. The won-dollar exchange rate has steadied around the 1,400 won range per dollar. With the return of the Donald Trump administration for a second term, a more aggressive tariff regime could be on the horizon.

"Additional U.S. sanctions against China could pose a short-term unfavorable factor in Samsung Electronics' HBM business operating in China," Kiwoom Securities analyst Pak Yu-ak said.

Current estimates for operating profits in the fourth quarter are 9.38 trillion won, a 30.8 percent decline over the same period.

As concerns grow ahead of the company's fourth-quarter earnings announcement in January, the brokerage industry has slashed its target price. According to market tracker FnGuide, Tuesday, the consensus on Samsung Electronics share price stands at 82,125 won — a 20 percent drop compared to three months ago.

"A significant drop in the stock price is unlikely, but the high possibility of downward revisions to Samsung Electronics' earnings consensus suggests that it will take more time for a substantial stock price recovery," iM Securities analyst Song Myung-seop said.

Despite these challenges, analysts still recommend buying. Song added, "The likelihood of a semiconductor price decline cycle has already been largely factored in."