Domestic stock markets, which plummeted due to concerns over a slowdown in AI investment following the U.S. midterm elections, are expected to seek a rebound next week (November 9-13). While there are warnings of continued selling pressure early in the week, some analysts believe the recent decline has been excessive. Key factors influencing investor sentiment will include the earnings report from U.S. AI infrastructure firm CoreWeave and major economic indicators such as the Consumer Price Index (CPI).
According to the Korea Exchange on November 7, the KOSPI closed at 5,059.69, down 324.11 points (6.02%) from the previous trading day. Compared to the closing price of 5,730.74 on October 30, this marks an 11.71% drop over the past week. During trading, the index fell as low as 4,911.28, triggering a circuit breaker. The KOSDAQ also closed down 5.03% at 644.27.
This sharp decline follows the Democratic Party's control of both houses of Congress after the midterm elections, raising fears of stricter regulations on AI data centers. Coupled with concerns over the substantial capital expenditure burdens and profitability of big tech companies, this led to a sell-off in U.S. semiconductor stocks, which impacted the domestic market.
Analysts warn that high volatility may continue into early next week. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., noted in a report titled "Beware of Aftershocks from Panic Selling" that the breach of technical support levels in the U.S. market and a surge in put option trading have intensified selling pressure. He added that uncertainties regarding the profitability of AI investments could be exacerbated by the upcoming earnings report from NeoCloud.
Conversely, some analysts argue that market fears may be overblown. Lee Kyung-min, a researcher at Daishin Securities, acknowledged that while the Democratic victory could lead to delays and increased costs in data center construction, the likelihood of a complete federal construction halt is limited. He pointed out that political barriers, such as the potential for a veto from President Donald Trump, make significant regulatory changes unlikely in the near term.
Next week, the most anticipated event is the third-quarter earnings report from U.S. AI cloud company CoreWeave, scheduled for November 10. Given recent concerns over rising corporate bond yields and credit default swap (CDS) premiums, investors will be focused not only on revenue growth but also on cash flow, interest expenses, and additional funding plans.
If CoreWeave confirms its AI investment plans and funding capabilities, it could restore investor confidence in semiconductor and AI-related stocks. However, if debt burdens are highlighted again or investment plans are scaled back, further downward pressure cannot be ruled out.
U.S. inflation indicators will also play a crucial role in determining market direction. The October CPI will be released on November 10, followed by the Producer Price Index (PPI) on November 13. Higher-than-expected inflation rates could raise concerns about additional interest rate hikes by the Federal Reserve. Conversely, confirmation of easing inflation could lead to a rebound in growth stocks that have seen significant declines.
There is also a perspective that the results of the U.S. midterm elections may have a positive long-term impact on financial markets. Heo Jin-wook, a researcher at Samsung Securities, noted that the Democratic Party's policy priorities include expanding health insurance subsidies, tariff reductions, and ending the war in Iran. Since strengthening AI regulations is not a top priority for the Democrats, concerns in this area may diminish over time.
Heo predicts that the positive effects of declining international oil prices and stabilizing long-term U.S. interest rates, due to reduced geopolitical risks, will outweigh the risks associated with stricter AI regulations in the medium to long term. He specifically pointed out that lower oil prices could lead to reduced inflation, improving household real income and boosting consumption.
The significant drop in the KOSPI has also notably reduced valuation burdens, supporting expectations for a rebound. Daishin Securities estimates that the KOSPI's 12-month forward price-to-book ratio (PBR) at 1x is around 5,330 points, while the forward price-to-earnings ratio (PER) at 3.447x is approximately 4,922 points. The researcher characterized the recent decline as a temporary excessive drop (undershooting) occurring during the formation of a medium-term bottom.
Ultimately, the domestic stock market is expected to attempt a rebound next week as it absorbs the shock from early-week declines, driven by the CoreWeave earnings report and U.S. inflation indicators. However, if uncertainties regarding the sustainability of AI investments persist or foreign selling continues, the battle over whether the KOSPI can stabilize above the 5,000 mark may intensify.
* This article has been translated by AI.
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