Alphabet Earnings to Shape Kospi’s Week as Markets Watch AI Spending Plans

AI spending, rates, the won and policy: Four variables in focus this week

Brokerages expect the Kospi’s direction in the July 20-24 week to hinge on Alphabet’s earnings, foreign investor flows, exchange-rate stability and the government’s review of leveraged exchange-traded fund policy. If the AI investment cycle holds, semiconductor shares could lead a rebound, they said.

Yuanta Securities on July 19 identified Alphabet’s earnings as the biggest variable for global equities this week. Lee Jae-won, an analyst at the firm, said the Google parent is one of the biggest-spending hyperscalers on AI service development alongside Microsoft, Amazon and Meta. Alphabet is due to report at 5 a.m. Korea time on July 23.

Brokerages are focused less on the earnings themselves than on Alphabet’s capital-expenditure plans for AI. Lee said the company is more likely to increase AI spending than keep it unchanged. Even if profitability from AI falls short of market expectations, concerns could ease if management uses the post-earnings conference call to explain the reasons for higher investment and outline its strategy.

A cut in AI spending, or even a decision to hold it at current levels, could be read as a sign that AI-related demand is no longer as strong as before. That would weaken expectations for growth in the AI industry and weigh on sentiment toward semiconductor and AI-related stocks in both South Korea and the US.

Shinhan Securities said the Korean stock market could move into a stabilization phase this week after its recent slide, with room for a rebound attempt. Investor sentiment may recover gradually as markets assess geopolitical risks in the Middle East and earnings from major US companies.

Kang Jin-hyuk, an analyst at the firm, called Alphabet’s earnings the key event of the week. He said market sentiment will depend not only on how much the company plans to invest in AI, but also on its comments about shortages in AI chip supply and long-term supply agreements, or LTAs.

Kang also said Korean bank stocks could extend gains after the Bank of Korea raised its benchmark interest rate to 2.75% annually. Higher rates typically support bank profitability. Still, investors should watch for a possible sell-the-news reaction if the increase has already been priced in.

He also expects the won to stabilize against the dollar. The exchange rate could fall to around 1,480 won per dollar, helped by forward dollar sales from SK Hynix and Hanwha Ocean. Such transactions involve companies selling dollars they expect to receive in the future, increasing dollar supply in the market and potentially supporting the won.

Kang said the government’s instruction to prepare supplementary measures for single-stock leveraged ETFs is also a positive factor for the market. Tighter rules, including higher minimum deposit requirements, could ease excessive concentration in specific stocks or leveraged products and help reduce volatility.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com