Goldman Sachs Cuts KOSPI 12-Month Target 25% to 9,000 After Calling for 12,000

Goldman Sachs cut its 12-month target for the KOSPI by 25% to reflect concerns over artificial intelligence-related investment and a sharp selloff in South Korea's stock market.

Bloomberg reported on October 25 that Goldman lowered its 12-month target for the KOSPI to 9,000 from 12,000. The revision follows a drop of more than 35% in the index from its June peak and reflects more conservative valuation assumptions. Even so, the new target still implies upside of more than 60% from current levels.

Goldman had raised its KOSPI target several times this year, taking it as high as 12,000 in June. It had kept that target unchanged even as a global selloff in AI-related stocks spread.

Concerns over profitability in the AI industry have been a main driver of the recent plunge in the KOSPI. South Korea's stock market, which has heavy exposure to semiconductor companies such as Samsung Electronics and SK Hynix, came under selling pressure as the cost of large-scale AI infrastructure investment climbed and doubts about returns deepened.

In a report dated October 25, Goldman wrote that the market was reflecting an excessively negative view of corporate fundamentals. It added that while it lowered the target to incorporate more conservative valuation assumptions, current levels still offer an attractive risk-reward opportunity.

The KOSPI's 12-month forward price-to-earnings ratio has fallen to about 4 times. According to Bloomberg data, that is the lowest level among 18 major markets since 2006. Valuations in South Korea's stock market have also dropped to about half those of Indonesia's market.

Goldman said semiconductor shares are now pricing in a scenario in which industry earnings fall 65% by 2027. The bank described that outlook as excessively pessimistic. Excluding memory-chip companies, the rest of the market is trading at a forward P/E ratio of just 7.6 times.

Despite the lower target, Goldman maintained a positive view on power, industrial and corporate-governance reform-related stocks. It also identified companies set to benefit from a recovery in the domestic economy and the spread of South Korean popular culture as promising investments.