Goldman Sachs slashed its 12-month target for South Korea’s benchmark Kospi index from 12,000 to 9,000, responding to a 40 percent drop from record highs and slowing earnings momentum. Despite the 25 percent reduction, strategists argue the market is deeply undervalued and still holds more than 60 percent upside from current levels.
The downgrade follows months of sharp declines across Asian technology stocks, driven by mounting anxiety over the sustainability of massive artificial intelligence infrastructure spending, rising oil prices, and increasingly hawkish central banks. Goldman Sachs strategists led by Timothy Moe noted that the benchmark index has tumbled 40 percent from its record highs, forcing a recalibration of their previous forecasts as market volatility heightens and earnings momentum slows.
Goldman Sachs Trims KOSPI Target 25 Percent to Reflect Conservative Earnings Assumptions
The investment bank originally lifted the KOSPI target to 12,000 in June during the peak of the year’s tech rally. Even as a global sell-off began later that month and knocked the benchmark down more than 35 percent, the firm maintained its high target by reaffirming its conviction despite falling prices. The latest revision down to 9,000 does not signal a change of heart regarding Korean corporate profits, according to the bank’s research notes.
The market is pricing in an excessively negative view of fundamentals. We have incorporated more conservative assumptions into how we assess the financial strength of corporations, but Korea’s stock market remains attractive on a risk-revenue basis.
Timothy Moe, Goldman Sachs
Rather than a capitulation on underlying business health, strategists explained that the adjustment serves to incorporate more conservative assumptions about how the market assesses companies’ fundamentals. Even with the reduced target, the bank’s mathematical models indicate that the index still implies more than 60 percent upside potential from current market levels.
Semiconductor Heavyweights And Valuations Not Seen Since 2006
The downturn in South Korea’s equities began directly within the semiconductor sector. Samsung Electronics and SK Hynix carry a heavy weighting. As funding costs climbed and questions arose regarding the return on investment for AI data centers, selling pressure hit these blue-chip chipmakers hard.
Consequently, the market valuation of South Korean equities compressed rapidly. Bloomberg-compiled data shows the KOSPI’s 12-month forward price-to-earnings ratio dropped to about 4 times, marking a low not recorded across 18 major global markets since 2006. BeInCrypto noted that the benchmark closed at 5,550.30 on October 23, shrinking its 2026 gain to 28.79 percent from a peak of roughly 116 percent in June.
| Metric | Previous Peak (June) | Current Level (October) |
|---|---|---|
| KOSPI Target Index | 12,000 | 9,000 |
| KOSPI Index Value | Peak Levels | 5,550.30 (as of Oct. 23) |
| Forward P/E Ratio | Higher Multiples | About 4 times |
Contrasting Views on Memory Chip Earnings and Market Fear
Goldman Sachs maintains that semiconductor share prices have fallen so steeply they already reflect a projection for earnings to drop 65 percent in 2027, a bust scenario the bank considers excessively pessimistic.
Outside of memory chips, which represent about half of the index, non-memory stocks trade at a forward P/E of 7.6 times and remain estimated to be more than 30 percent undervalued. However, external market signals show investors pulling back. SK Hynix suspended the U.S. IPO of its Solidigm unit due to deteriorating market conditions, and an Australian data-center operator pulled a nearly $5 billion listing, highlighting broader doubts about AI infrastructure returns as foreign investors recorded $1 billion in South Korean equity outflows.
Upcoming Corporate Earnings and Technical Thresholds to Watch
Technical analysts point out additional vulnerabilities in local charts. Fidelity’s Jurrien Timmer noted via social media that the KOSPI is barely holding onto a head-and-shoulders neckline near 5,451, a threshold that sits roughly 2 percent below the October 23 close and signals potential for further losses if breached according to data shared on October 21. Meanwhile, retail investors who piled into the market earlier in the year face mounting pressure, with estimated average entry positions around 6,550 leaving typical retail holdings roughly 15 percent underwater.
Attention now shifts directly to upcoming corporate results to test whether the market’s severe earnings assumptions are justified. SK Hynix is scheduled to hold its third-quarter conference call on October 28, followed immediately by Samsung Electronics reporting full results with division figures on October 29 to provide clarity on 2027 pricing and order outlooks.
Amid the prevailing sell-off, other major institutions hold differing expectations. Nomura Securities adopted an optimistic stance on the sector, setting target prices of 670,000 won for Samsung Electronics and 4.7 million won for SK Hynix on the premise that AI investment concerns are overdone. Goldman Sachs itself continues to favor select domestic sectors, maintaining positive views on power, industrials, corporate governance reform beneficiaries, and companies tied to K-culture and domestic demand recovery.
