Goldman Sachs remains bullish on the South Korean stock market: Driven by the AI memory boom, potential gains could reach 80%.

Goldman Sachs strategist Timothy Moe maintains his bullish target for the South Korean stock market, believing that investors are underestimating the duration of the benefits that artificial intelligence (AI) will bring to domestic memory chip manufacturers. The chief equity strategist for Goldman Sachs in the Asia-Pacific region keeps the benchmark KOSPI index target at 12,000 points, which implies nearly an 80% upside from the current level. This forecast, made three months ago, was already one of Wall Street's most optimistic expectations. We still stand by this judgment the core DRIVE lies in our belief that earnings will come to fruition as expected, Moe stated in an interview last Friday, The market is underestimating the duration of this earnings cycle. This optimistic position contrasts with the fact that the KOSPI index has dropped 27% since its record high in June. The reasons behind this decline include concerns over the sustainability of the tech giants' AI investment boom and a sharp increase in the volatility of the South Korean stock market. Although chip giants like Samsung Electronics and SK Hynix have reported impressive earnings again, their impact on stock prices has been limited. However, the global race for data centers is causing a severe shortage of memory and storage chips, driving up their prices Moe predicts that this supply-demand dynamic will intensify by 2027. He indicated that capital expenditures by American tech giants are expected to exceed $1.2 trillion next year, a significant increase from the previous forecast of $800 billion. Even if they are not making profits, these hyperscale companies must continue to invest, Moe pointed out, This is extremely favorable for the memory industry because it will drive demand for computational power, which highly depends on memory. Goldman Sachs strategists expect the earnings growth of KOSPI constituents to be about 360% this year, slowing to around 35% by 2027. He added that the market has fully digested the expectation that earnings growth will eventually slow. Moe also acknowledged the potential competitive pressures from Chinese rivals and the political risks that may impact the construction of data centers in the U.S., but he believes that the fundamentals will remain favorable for advanced memory chip manufacturers over the next two to three years. He stated that his KOSPI target is based on a forward price-to-earnings (P/E) ratio of 7.5 times. The current P/E ratio of the index is only 5.3 times, about half of the average over the past seven years. If South Korean companies can achieve their earnings forecasts, Moe claims that a KOSPI target of 12,000 points doesnt seem as unrealistic as it looks.