• Goldman Sachs (GS) cut its 12-month KOSPI target to 9,000 from 12,000, implying roughly 62% upside from the October 23 close of 5,550.30.
  • The index has plunged approximately 40% from its June peak, pushing forward valuations to just 4x earnings despite record corporate profits.
  • Samsung Electronics (005930.KS) and SK Hynix (000660.KS), which together account for nearly half the KOSPI’s weighting, report third-quarter results on October 29 and 28, respectively.

A Sobering Downgrade, Not a Bearish Call

Goldman Sachs strategists, including Timothy Moe, lowered their 12-month KOSPI target by 25% in an October 25 report, from 12,000 to 9,000. Yet the bank retained a positive risk/reward assessment, arguing that the selloff has made Korean equities excessively cheap. Against the October 23 close of 5,550.30, the revised target implies approximately 62% upside—not a guaranteed return. The central issue is whether today’s exceptional semiconductor profits can endure as investors reassess global artificial-intelligence spending.

Reports put the KOSPI’s decline at more than 35% to roughly 40% from its June peak, with “40%” best treated as approximate given differing reference points. At about four times forecast earnings, according to Goldman’s analysis, the index is pricing in an excessively pessimistic outlook—particularly for semiconductors. The bank’s reported estimate that chip valuations imply a 65% decline in 2027 sector earnings describes what it thinks the market is pricing in, not Goldman’s own forecast of a 65% earnings collapse.

Earnings Week Looms Large

Samsung Electronics and SK Hynix are entering a major earnings week, with results scheduled for October 29 and 28, respectively. Guidance on memory demand, supply agreements and shareholder distributions may matter more than headline profit records.

An October 25 industry report put their combined third-quarter operating profit above 184 trillion won, combining Samsung’s preliminary operating profit of 107.4 trillion won with an analyst forecast of approximately 77 trillion won for SK Hynix. Those figures should not be presented as two finalized earnings releases: SK Hynix’s number remained a forecast, and detailed results were still forthcoming. Rising DRAM prices, high-bandwidth memory demand and supply shortages were identified as profit drivers.

Yet Samsung and SK Hynix shares were approximately 36% and 52% below their late-June levels, respectively, as of October 23—a stark illustration of investors looking beyond current earnings. Together, the two chipmakers accounted for nearly half the KOSPI’s weighting in September, making their outlook unusually consequential for the benchmark.

AI Exposure Cuts Both Ways

The selloff reflects a global reassessment of whether AI infrastructure spending will generate sufficient returns, especially as financing costs rise. Reuters reported on October 13 that Samsung and SK Hynix fell 10% and 8%, respectively, while Japan’s memory-chip producer Kioxia (285A.T) dropped 13%. This is not solely a Korea-specific loss of confidence.

The economic exposure is substantial. A Yardeni Research note reported by Investing.com said semiconductors represented 41% of Korean exports in September. That concentration links export receipts, corporate investment, earnings and market sentiment closely to the same global demand cycle. Still, there is counterevidence to the bearish narrative: strong preliminary AI-server sales from Super Micro Computer (SMCI) and surging Korean chip exports helped trigger a sharp KOSPI rebound during the preceding week. Investors are weighing weak share prices against still-strong operating demand, rather than responding to an already-established collapse in chip sales.

Valuation and Reform: Two Separate Hurdles

A low forward price-to-earnings ratio can indicate undervaluation, but it can also reflect expectations that forecast earnings are near a cyclical peak. Goldman’s bullish case requires either earnings to prove more resilient than prices imply, investors to pay a higher multiple for those earnings, or both.

The most directly relevant domestic policy is South Korea’s corporate “Value-Up” initiative, launched in 2024 to address the longstanding “Korea discount.” It encourages better governance, capital allocation and shareholder returns. A September assessment found that investors welcomed large payouts but still wanted broader evidence of improved board oversight and minority-shareholder protection. Participation remains voluntary. Samsung and SK Hynix had announced combined shareholder-return plans worth more than 130 trillion won for 2026, according to that report. Their muted market reception suggests dividends and buybacks alone have not resolved concerns about either governance or the durability of the chip boom.

The Road Ahead

The immediate tests are Samsung’s and SK Hynix’s earnings disclosures, especially the durability of memory pricing and AI-related demand, high-bandwidth-memory product execution and supply commitments, whether long-term customer agreements support earnings visibility, and further dividends and buybacks. KB Securities’ Kim Dong-won identified sustained earnings improvements and expanded shareholder returns as potential catalysts for a revaluation, while Reuters’ analysis highlights rising financing costs and doubts about AI-spending returns as continuing threats.

Goldman’s 9,000 target is therefore best understood as a conditional recovery thesis over approximately the next year. It argues that current prices are too pessimistic, but the bank’s own 25% forecast reduction demonstrates how sensitive that thesis remains to earnings expectations and the multiples investors are willing to pay. Neither strong chip demand nor better corporate governance automatically solves the other problem; a sustained recovery requires confidence in both.