Goldman Slashes Kospi Target 25% to 9,000 on Valuation Fears

Goldman Sachs cut its 12-month target for South Korea's Kospi index by 25% on Sunday, lowering it from 12,000 to 9,000 after a 40% slide from the index's midsummer peak. The note was lead-authored by Tim Moe, Goldman's chief equity strategist for Asia, and it matters far beyond Seoul. The Korean market has become a weathervane for the global artificial-intelligence trade, and semiconductor stocks now account for almost one-fifth of the S&P 500 by market capitalization.

Why does the Kospi lead the AI trade?

Two companies explain the index's outsized role. Samsung Electronics and SK Hynix, the two largest Kospi stocks, together make up roughly half the benchmark and manufacture around two-thirds of the world's semiconductors between them. Korean memory-chip makers are the picks-and-shovels trade of the AI boom, and chip pricing acts as a bellwether for scarcity of supply — a shortage that many analysts and chief executives have flagged. If AI capital spending falls, the semiconductor sector feels the pinch first. That mechanism explains the recent weakness in the iShares semiconductor exchange-traded fund as concerns about the cycle's sustainability have grown.

What did Goldman actually cut?

The downgrade is not about profits. Moe said the revision was made "to incorporate more conservative assumptions about how the market may price underlying fundamentals." In plain terms, the earnings are fine; the multiple investors attach to them is the problem. Despite the cut, Moe stressed that his team remains very bullish on Korea and points to 60% upside to the revised 9,000 target.

How much of the crash is leverage, not AI?

Part of the slump reflects doubts about the AI capex cycle, but another part is domestic and mechanical. Korean retail investors — the army known as "ants" — rode the market's blistering rally through 2025 and the first half of 2026. When prices turned, margin calls forced them to liquidate. The resulting volatility pushed analysts to attach a much higher equity risk premium to Korean stocks, and Moe maintains this deleveraging accounts for roughly half of the Kospi's 40% drop.

How cheap is Korea now?

By Goldman's math, extremely cheap. The market now trades at just four times the next 12 months' earnings, which the bank calls three-standard-deviations cheap given its divergence from historical pricing. Even a rally to the 9,000 target would leave the index at 6.5 times forward earnings. With Korean corporates delivering an average return on equity of 23%, Moe calculates the market would still be 20% undervalued at that level.

Where does Goldman see value beyond chips?

Moe recommends several other sectors:

• Industrials
• Financials
• Construction companies
• Department stores

He also flags companies improving corporate governance under Korea's value-up program as a focus.

Early trading Monday pointed to stabilization. The iShares MSCI South Korea ETF was fractionally higher in premarket trading at $151.29, and SK Hynix's Nasdaq-listed depositary receipts rose 2.54% to $140.58. If Goldman's 60% upside call is right, the margin-call storm may have done more damage to Korean price tags than to Korean earnings — and global AI investors watching Seoul will find out which one the market reprices first.