Goldman Sachs has projected that the boom in memory semiconductors driven by increased investment in artificial intelligence (AI) may last longer than expected, maintaining its KOSPI target of 12,000.
On September 6, Timothy Moe, Goldman Sachs' Chief Asia-Pacific Equity Strategist, stated in an interview with Bloomberg, "We are still maintaining this target, and the performance improvements we expect will support it." He emphasized that the market is underestimating how long this performance cycle will last.
Goldman Sachs initially set the KOSPI target at 12,000 in June, which was considered one of the most optimistic forecasts at the time.
Recently, the KOSPI has fallen about 27% from its all-time high recorded in June, influenced by concerns over the sustainability of AI investments from big tech companies and increased volatility in the Korean stock market. Although Samsung Electronics and SK Hynix reported strong earnings, this did not lead to a rebound in their stock prices.
However, Moe noted that the competition in global data center construction is leading to a continued shortage of memory and storage semiconductors, which he predicts will worsen by 2027.
He estimated that investment spending by major U.S. tech companies will exceed $1.2 trillion next year, significantly up from the previous forecast of $800 billion.
Moe remarked, "Hyperscalers must continue to invest even if they are not making profits, which is very positive for the memory industry. This will drive demand for processing power, which requires a lot of memory."
Goldman Sachs expects that the profits of KOSPI-listed companies will increase by about 360% this year, but the growth rate is projected to slow to about 35% by 2027. Moe added that the market is already well aware of the expected slowdown in profit growth.
He identified the competition from Chinese rivals like CXMT and potential political backlash against the expansion of data centers in the U.S. as risk factors. Nevertheless, he anticipates favorable conditions for advanced memory semiconductor companies over the next two years.
The KOSPI target of 12,000 is based on an expected forward price-to-earnings ratio (PER) of 7.5. Currently, the KOSPI's forward PER stands at 5.3, which is about half of the recent seven-year average.
Moe stated that if Korean companies achieve Goldman Sachs' profit forecasts, the KOSPI target of 12,000 is "not as outrageous as it may seem."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.