The cut removes one of the most bullish institutional Kospi targets from the table, but the bank’s insistence on deep value gives contrarian investors a framework for buying into weakness rather than chasing the selloff lower. Samsung Electronics and SK Hynix remain the swing factor, since any stabilisation in sentiment toward AI capital spending would likely feed directly into the index given their weight. The sector preferences point to a possible rotation inside Korean equities, away from memory chips and toward power, industrials and domestically focused names, which could limit the downside for the broader market even if chip stocks stay under pressure. Foreign investor flows will be the key signal of whether the valuation argument is gaining traction.
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Goldman Sachs has blinked on its Kospi call but not folded, arguing that a market trading at about four times earnings is pricing in a chip downturn far worse than is likely.
Summary:
Goldman Sachs lowered its 12-month Kospi target to 9,000 from 12,000, a 25% cut, citing AI investment concerns and more conservative valuations
The index has fallen more than 35% from its June peak, and the new target still implies upside of more than 60%
The Kospi’s 12-month forward P/E has dropped to around four, a level not seen across 18 major markets since 2006, and roughly half the valuation of Indonesian stocks
Goldman estimates current chip valuations imply a 65% fall in sector earnings in 2027, which it considers overly pessimistic
Stocks outside memory chips, about half the index, trade at under eight times forward earnings
Preferred themes include power, industrials, corporate governance plays, domestic recovery and Korean popular culture
Goldman Sachs has cut its 12-month target for South Korea’s Kospi Index by a quarter, lowering it to 9,000 from 12,000, as worries over artificial intelligence spending and a shift toward more conservative equity valuations weigh on the market. Even so, the bank argues that Korean shares now look deeply undervalued, and its new target still implies a gain of more than 60% from current levels.
The downgrade follows a slide of more than 35% in the benchmark from its June peak. Goldman had raised its Kospi target in June and kept its bullish stance even as global technology stocks began to retreat on concerns about the scale of AI investment.
South Korea’s market has been especially exposed to that shift because of its heavy concentration in memory chipmakers Samsung Electronics and SK Hynix. Both have been major beneficiaries of demand for chips used in AI infrastructure, which has turned the Kospi into a widely watched gauge of investor sentiment toward the technology. As concerns have grown about rising financing costs, enormous infrastructure outlays and uncertain returns on that spending, selling has spread across Korean equities.
Goldman’s strategists said the market is now discounting an excessively bleak outlook for corporate fundamentals. The Kospi’s 12-month forward price-to-earnings ratio has fallen to around four, a level not seen across 18 major markets since 2006, and Korean stocks now trade at roughly half the valuation of Indonesian equities. By the bank’s estimates, current semiconductor valuations imply a 65% collapse in sector earnings in 2027, a scenario the strategists regard as overly pessimistic.
The valuation argument extends beyond chips. Companies outside the memory sector, which make up about half the index, trade at under eight times forward earnings, according to the bank.
Despite trimming its headline target, Goldman continues to favour selected areas of the market, including power, industrials, stocks tied to corporate governance reform, and companies set to benefit from a domestic economic recovery and the global reach of Korean popular culture. Whether investors embrace that value case is likely to depend on how sentiment toward AI spending evolves in the months ahead.
This article was written by Eamonn Sheridan at investinglive.com.
