About-face at 3,000 points. Goldman Sachs reduces its twelve-month target for the Kospi from 12,000 to 9,000 points less than five months after raising it in the midst of chip euphoria. On Monday, the Seoul index ended the session below 5,500 points.
The American bank is not throwing in the towel and still sees more than 60% increase possible within a year. The Korean crash of October 15 took bitcoin towards $80,000 and it has barely moved since.
Goldman Sachs erases Kospi's AI premium
Back to June 3. Goldman then raised its target on the Korean index to 12,000 points, while Samsung Electronics and SK Hynix set records. The Kospi closed on June 22 at 9,114 points, its all-time high, then dropped almost 40% until Friday evening (5,550.30 points), as shown in the graph below.
The October 25 memo, co-signed by strategist Timothy Moe, returns the objective to its level before this increase. Small irony of the calendar, 9,000 points corresponds more or less to the June peak.
Goldman is not prophesying the apocalypse. The bank believes that “the market is pricing in an overly negative fundamental outlook,” according to the report published by the Seoul Economic Daily. In her eyes, the valuations of semiconductor manufacturers assume a 65% drop in their profits in 2027, a scenario that she considers excessively pessimistic.
The numbers are dizzying. The Kospi pays around 4 times expected twelve-month earnings, and Bloomberg has not seen any of the 18 major markets it tracks fall this low since 2006. Out-of-memory stocks, roughly half the index, trade at 7.6 times earnings. The bank maintains a weakness for energy, industry, beneficiaries of governance reform and companies driven by Korean pop culture.
Samsung and SK Hynix, Kospi justices of the peace this week
Record profits, prices at half mast. Samsung on Oct. 8 reported preliminary third-quarter operating profit of 107.4 trillion won, about 20 percent higher than the second quarter. However, its action remained 18.2% below its September 1 level on Friday evening. SK Hynix was 25.4% behind in the same period.
The market is selling off the top of the memory cycle before it turns around. And share buybacks are no longer there to cushion the fall, since SK Hynix has completed a program of 40,000 billion won and Samsung another of 15,000 billion.
Response mid-week. SK Hynix publishes its accounts on Wednesday October 28, Samsung Electronics on Thursday 29. Analysts expect from the two groups a cumulative operating profit of 184,400 billion won (around 139 billion dollars) according to the Korea JoongAng Daily.
The Seoul Stock Exchange did not wait for the verdict. Opened down 0.92% to 5,499 points, the Kospi fell to 5,455 points during the session before closing Monday at 5,469.47 points, down 1.46%. Samsung Electronics lost 1.16% to 213,000 won, while SK Hynix finished almost stable (+0.08%) two days before its results.
From Seoul to bitcoin, AI debt makes you dizzy
The doubt gnawing at Seoul comes from the United States. Goldman cites questions about the profitability of the mountains of investment sunk into AI infrastructure, compounded by rising financing costs.
Elon Musk put harsh words on this unease this weekend. The boss of SpaceX confirmed on X that he had closed $40 billion in debt to buy graphics processors. He warns that debt markets have “almost completely shut off” the tap to companies that have little revenue outside of AI data centers. More than 200 “neoclouds” (on-demand Nvidia chip rental companies) will, according to him, disappear or be bought out.
Bitcoin is not immune to the cold snap. It hit $79,100 on Saturday, its lowest in five weeks, and was trading around $80,000 on Monday around 6 a.m. (Paris time) according to CoinGecko. The Fed decides Wednesday evening. A new rate hike, which futures markets deem unlikely this time, would make the money that AI so badly needs even more expensive.
