KOSPI sways to foreign selling... NVIDIA earnings 'anxiously awaited' [Today's market preview]

Since the start of November, the domestic stock market has been experiencing extreme swings around the 4,000-point level. Investor anxiety has grown as debates over the overvaluation of artificial intelligence (AI) theme companies, which led this year's rally, intensified. Experts say this volatility is likely to continue until this Thursday, when AI-theme bellwether NVIDIA releases its earnings.

According to the Korea Exchange, on the 14th the KOSPI index closed at 4011.57 after plunging 3.81%. After recovering the 4,000-point level last Monday, the index climbed to 4180.63 points on Thursday and was on the verge of reclaiming the 4,200-point level, but gave up most of the week's gains in Friday trading. On that day foreign and institutional investors were net sellers of domestic stocks on the KOSPI market worth KRW 2.3666 trillion and KRW 899.7 billion, respectively. Individual investors, who turned into buyers during the market adjustment, were net purchasers of KRW 3.2328 trillion.

The New York market has shown similar volatility. The Dow Jones Industrial Average fell 0.65% to 47147.48, the S&P 500 index dropped 0.05% to 6734.11, while the tech-heavy Nasdaq Composite closed up 0.13% at 22900.59. The New York market opened weaker amid concerns over AI-related stocks' overvaluation, but bargain buying flowed in and led losses to finish, driven by NVIDIA (up 1.77%) and Microsoft (1.37%).

Experts say the directionless market will likely confirm a short-term trend this Thursday. That is when NVIDIA, the world's largest company by market capitalization and a leader in the AI theme, will release its fiscal 2026 third-quarter (Aug–Oct) results after the U.S. market close.

Han Ji-young, a Kiwoom Securities analyst, said, "The key is how much NVIDIA's quarterly results and guidance exceed market consensus," adding, "It will also be important whether revenue shortfalls from export restrictions to China can be offset by other regions and whether the company can convince the market of positive demand prospects for its main GPUs." Amid spreading concerns about profitability across the AI industry, whether the gross margin — a profitability indicator — can remain in the low 70% range or higher was cited as a factor that could ease 'bubble' concerns.

So far, expectations and worries about NVIDIA's results are mixed. The consensus of 42 institutional analysts (average estimate) is revenue of $54.94 billion and earnings per share of $1.25. Morgan Stanley's raising of its target price from $210 to $220 on the 14th, citing a high chance of a surprise, is an indicator of Wall Street's confidence. On the other hand, the fact that big tech investors such as SoftBank and Peter Thiel sold their entire stakes ahead of the earnings announcement has contributed to growing unease.

In the domestic market, there are also views that foreign selling will ease somewhat and defend the market's downward trend. This month foreign investors were net sellers of KRW 9.1 trillion in domestic stocks in just two weeks. Even on a monthly basis this ranks third historically, but unlike the top spots — March 2020 (-KRW 12.5 trillion), second (-KRW 9.3 trillion), and fourth (-KRW 8.7 trillion) — which occurred during major shocks such as the COVID-19 pandemic, mutual tariff shocks, and the financial crisis, the relative absence of such major adverse events has led some to argue the selling is excessive.

With exchange rate conditions also somewhat improved, there is analysis that foreign selling may retreat to some extent. One analyst noted, "Currently, the burden is mainly short-term overvaluation, and it's worth noting that semiconductor-driven KOSPI earnings momentum remains solid and that the exchange rate, which had surged to the KRW 1,470 range, has fallen to the KRW 1,450 range," adding, "It's difficult to expect foreign investors to quickly switch to elastic net buying this week, but it would be appropriate to watch the market on a path where net selling is settled."

Reporter Jeon Beom-jin forward@hankyung.com