A Goldman Sachs Group Inc. strategist is standing by his bullish target for South Korean stocks, saying investors underestimate how long the AI boost for the nation's memory chipmakers will last.
The investment bank's chief Asia Pacific equity strategist Timothy Moe maintains his target of 12,000 for the benchmark Kospi, implying upside of nearly 80% from the current level. His estimate was one of the most bullish targets on the street when it was set three months ago.
“We're still holding to it — it's driven by what we think will be earnings delivery,” Moe said in an interview Friday. “The market is underpricing the duration of this earning cycle.”
The optimism belies the 27% plunge in the Kospi from its June record high on concerns over the sustainability of Big Tech's AI spending boom and a surge in Korean stock volatility. Another round of stellar results from chipmakers from Samsung Electronics Co. and SK Hynix Inc. has done little to boost shares.
Still, the global race to build data centers has driven massive shortages of memory and storage chips, lifting their prices — a dynamic that Moe expects will only intensify in 2027 year. US Big Tech spending is estimated to top $1.2 trillion next year, up sharply from prior forecasts of $800 billion, he said.
The hyperscalers “have to continue to spend even if they don't make money,” Moe said. “It's great for memory because it's going to drive compute demand, which is very memory intensive.”
The Goldman strategist estimates earnings growth of roughly 360% this year for Kospi members, moderating to about 35% in 2027. The fact that profits will start to slow down eventually is already well-understood by the market, he added.
Moe also acknowledges risks from Chinese competitors like CXMT Corp. and the potential political pushback against the US data-center buildout, but says the fundamentals still favor advanced memory chipmakers for the next couple of years.
He said his Kospi target is based on 7.5 times forward earnings estimates. The index currently trades at 5.3 times, roughly half its seven-year average.
If Korean companies achieve his earnings projections, then Moe says his 12,000 Kospi estimate “isn't as crazy as it might appear.”
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.