How South Korea’s Stock Market Volatility Is Impacting US Stocks

On the July 20, 2026, episode of The Morning Filter podcast, hosts Susan Dziubinski and Morningstar Chief US Market Strategist Dave Sekera discuss why Morningstar raised the fair value estimates for ASML ASML and Taiwan Semiconductor TSM stock after earnings, and what might have driven the surprising market reaction to what seemed like good results. Here’s an excerpt from the conversation.

How ASML’s Growing Capacity Is Growing Our Confidence in the Stock

Susan Dziubinski: We also had a couple of tech names reporting last week. Morningstar raised its fair value estimate on ASML ASML by quite a bit after earnings. Walk us through the results in that fair value hike.

David Sekera: The results in and of themselves were very strong, but when I think about the fair value and why we hiked it as much as we did, it wasn’t about the quarterly earnings. The company is talking about increasing the capacity that they have for the amount of throughput. When our analyst incorporated that higher capacity into the model, that’s really what drove that fair value increase. In this case, they’re increasing capacity by 30% in 2027, and I think they’re potentially increasing capacity by another 30% in 2028 as well. We think that 2027 capacity is essentially already booked, and we estimate that about 30% of that 2028 capacity increase is probably already booked as well. When we made those increases in our model, taking it out the next couple of years, we increased it to our revenue forecast all the way out to 2030. For example, our 2030 revenue forecast was $60 billion, which was the high end of their longer-term guidance. We’re now expecting that to be $70 billion. It’s really that capacity increases incorporated into our model that drove that fair value change.

TSM’s Even-Greater-Than-Expected Future Growth

Dziubinski: Morningstar also raised its fair value on Taiwan Semiconductor TSM after earnings by 27%. Now, we peg that at $534 per ADR. How did the results look for Taiwan Semi, and why the fair value boost?

Sekera: Again, results were very strong, but the story here isn’t about the historical results. It’s all about even-greater-than-expected future growth. Again, we updated our model, and we took into account an increase in the company’s revenue guidance. I think they increased the revenue guidance for this year to over 40%. Even a bigger impact than that was that the company increased its 2026 capex budget by $8 billion, up to $62 billion, essentially a 15% increase. In this company’s case, management is known to be pretty conservative, so I think there’s probably even more capital expenditure and more capacity increases yet to come in the second half of the year. Our assumption is that the capex increase this year is because they’re already talking to their clients, already talking to the hyperscalers. I’m assuming that those hyperscalers are also increasing their 2027 budgets, which is what the company is planning for right now.

TSM and ASML’s Pullback After Earnings

Dziubinski: And viewers and listeners, I didn’t have this information in my question, and I should have; we did increase that ASML ADR fair value to $2,050 per share, so that’s our fair value. Dave, now we raised these fair value estimates on both of these stocks, yet I think they both pulled back after earnings. Why do you think there was that disconnect?

Sekera: There’s a couple of things going on here. From that fundamental point of view, the market’s already priced in just the exceptionally strong growth that we’re looking for here in the second half of this year. To some degree, I mean these companies have already scheduled their production runs for 2027 for their clients. I think the market’s probably already priced in that as well. At this point, I think it’s now starting to become about trying to forecast 2028 revenue and earnings. I think the market volatility and prices indicate that there’s a pretty wide range of assumptions right now for 2028.

Now, from a technical point of view, there’s a lot of overhang in our market because of what’s going on in the Korean stock market. The Korean stock market has just been on a tear for really the past 1.5 to 2.0 years, and it’s led to a lot of speculative activity. If you look at the Korean market, over 50% of the market cap is just two stocks. If you think the US market’s concentrated, that can’t even hold a candle to what’s going on in the Korean stock market. Those two companies, of course, are Samsung 005930 and SK Hynix SKHY, which are both memory semiconductor companies. We all know that those stocks are up what, a couple hundred percent each year to date and even more than that over the past 52 weeks.

The Korean stock market peaked a couple of weeks ago. It’s down enough that it’s now technically in a bear market. I think it’s down about 25% from its high. We’re hearing a lot of reports out there that a lot of margin accounts ended up getting called in. Essentially, that’s probably led to a lot of forced selling over the past couple of weeks. At the same point in time, even with that market being down 25% year to date and having forced sellers, it’s still up 50% year to date, and it’s doubled over the past 52 weeks.

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