Korean Stock Index Forecast: Goldman Sachs Maintains 12,000-Point Target, Can the AI Storage Cycle Drive KOSPI to New Highs?

Goldman Sachs (GS) remains bullish on the Korean stock market.

Despite the KOSPI having pulled back approximately 27% from its historical high in June, and market concerns about whether AI capital expenditure can continue, Korean stock market volatility, and the semiconductor cycle heating up, Goldman Sachs Asia-Pacific Chief Equity Strategist Timothy Moe has not lowered his previously given 12,000-point target.

Calculated at current market levels, this target implies nearly 80% upside potential for KOSPI. A few months ago, when Moe first proposed the 12,000-point forecast, this figure was one of the most aggressive judgments in the market. Now, as the Korean stock market has experienced a significant correction, he still chooses to maintain this target.

Moe believes the biggest misconception in the current market is underestimating the pull-through effect of AI infrastructure investment on the profitability cycle of Korean memory chip companies, as well as the duration this round of demand growth may sustain.

AI Boom Hasn't Ended Yet; Memory Chips May Enter a Longer Boom Cycle

The Korean stock market has faced recent pressure largely because investors have begun questioning whether the increasing AI capital expenditure by global tech giants can be sustained long-term. If large tech companies slow down data center construction, profit expectations for Korean chip companies like Samsung Electronics and SK hynix would naturally be affected.

But Moe's judgment is the opposite.

He believes AI infrastructure construction is still in the expansion phase, and demand for high-performance computing and memory in data centers may continue to grow rapidly. As global hyperscale cloud service providers continue building AI data centers, memory and storage chip supplies have tightened, and rising prices have further improved the profitability of Korean memory manufacturers.

Moe expects this supply-demand imbalance may become even more pronounced by 2027.

Meanwhile, Goldman Sachs expects total capital expenditure by US large-cap tech companies next year could exceed $1.2 trillion, significantly higher than the previous forecast of approximately $800 billion. Even if some AI businesses have not yet achieved ideal profitability, tech giants still need to continuously increase infrastructure investment to maintain computing power and market competitiveness.

In Moe's view, this capital expenditure pattern itself is a significant positive for memory chip manufacturers. The greater the AI computing volume, the stronger the demand for high-bandwidth memory and other high-performance storage products, which ultimately flows through to Samsung Electronics, SK hynix, and other Korean companies.

Goldman Sachs Expects Korean Corporate Earnings Still Have Significant Growth Room

Another core basis for Goldman Sachs' bullish stance on KOSPI is the substantial gap between earnings growth and valuations.

Moe expects KOSPI constituent companies to achieve overall earnings growth of approximately 360% this year. Although this growth rate is expected to slow significantly to approximately 35% in 2027, the market has actually begun pricing in the risk of declining earnings growth ahead of time.

In other words, the potential cooling of Korean corporate profit growth does not mean the earnings cycle has ended.

Especially as large chip companies like Samsung Electronics and SK hynix continue to benefit from AI demand, the earnings foundation of the Korean stock market still has relatively strong support. If companies can ultimately meet Goldman Sachs' earnings forecasts, the current KOSPI valuation level appears relatively inexpensive.

Currently, KOSPI's forward price-to-earnings ratio is approximately 5.3x, only about half of the average over the past seven years. In contrast, Moe's valuation basis for the 12,000-point target is approximately 7.5x forward P/E.

This means Goldman Sachs' optimistic outlook does not completely rely on significant valuation expansion. As long as corporate earnings can grow as expected, while market valuations recover from extremely low levels toward long-term averages, KOSPI could gain substantial upside.

Therefore, while 12,000 points appears very aggressive, if Korean companies can deliver on their earnings forecasts, this target is not as far-fetched as it might seem simply by looking at the index level.

Of course, the Korean stock market is not without risks. Competition from Chinese memory chip manufacturers is intensifying, and US large-cap tech companies continuing to increase AI capital expenditure may also face policy, energy supply, and regulatory constraints. These factors could lead the market to reassess the return on AI investment and ultimately affect memory chip demand.

Especially as Chinese manufacturers continue to improve their technology and production capacity, it may become more difficult for Korean memory companies to maintain high profit margins over the long term. Meanwhile, if US data center construction slows due to changes in the policy or financing environment, the entire AI hardware industry chain could be affected.

However, in Moe's view, these risks are not yet significant enough to change the fundamental trend of advanced memory chip demand over the next few years.

Korean Stock Index Technical Analysis

From the daily chart, KOSPI latest rise of 4.25%, closing at 6971.63 points, regaining the descending trendline and standing above the 20-day moving average at 6726.41 points, indicating that bearish pressure following the June high has been weakening. The 14-day RSI rose to 54.47, above the 50 level and the 49.91 signal line, showing that short-term momentum has shifted to the bullish side while not yet entering overbought territory.

However, the intermediate-term reversal has not been fully confirmed. The index has just reclaimed the Fibonacci 0.382 level at 6914.94 points but remains below the 60-day moving average at 7211.49 points. If it can consecutively close above 6915 points and further break through 7211 points, the next target can be seen at 7480.94 points; after breaking through that level, space above will open up to 8046.93 points and 8681.17 points in sequence.

If AI memory demand continues to drive earnings growth for Samsung Electronics and SK hynix, it is not impossible for KOSPI to retest its all-time high of 9617.36 points. Only a sustained break above 9617 points would put the market into a price discovery phase.

The Fibonacci 1.618 extension level is located at 12319.78 points, very close to Goldman Sachs' 12,000-point target. Therefore, 12,000 points can technically serve as a long-term bullish scenario target.

On the downside, first pay attention to 6915 points and the 20-day moving average at 6726 points. If the index falls back below 6726 points, this breakout may turn into a false breakout, followed by a potential retest of 6276.50 points; if 6276 points is also lost, adjustment risk will expand to 6000 points or even the previous low of 5244.51 points.