Goldman Sachs dramatically lowers KOSPI target from 12,000 to 9,000 points, still insists there is 60% upside potential

Goldman Sachs strategists have lowered their 12-month target for South Korea's KOSPI index from 12,000 points to 9,000 points, a 25% decrease. Previously, the bank had raised the target multiple times this year. The latest downgrade stems from mounting concerns in the market regarding AI (artificial intelligence) trades. In a report dated October 25, analysts led by Timothy Moe stated that after the KOSPI dropped more than 35% from its peak in June, they adopted more conservative valuation assumptions. Nevertheless, the strategists believe this round of selling has left South Korean equities significantly undervalued, and the revised target still implies over 60% upward potential from current levels.

Goldman Sachs last raised its KOSPI target in June this year and maintained its 12,000-point goal even as global AI sell-offs caused index components to tumble. Chip manufacturing giants such as Samsung Electronics and SK Hynix have made the KOSPI a barometer for AI trades. Investors are increasingly worried about the sustainability of massive infrastructure spending in the industry, rising financing costs, and signs of insufficient returns, with selling pressure spreading across the broader South Korean market.

Goldman Sachs strategists wrote in the report, "The market is pricing in an overly negative fundamental outlook." They explained that the target was lowered to reflect "more conservative assumptions on how the market may price underlying fundamentals," but still believe "at current levels, the market offers attractive risk-reward."

The South Korean stock market has shifted from being the hottest major market this year to the cheapest worldwide, with valuations dropping to roughly half those of Indonesia. According to compiled data, KOSPI’s 12-month forward price-to-earnings ratio has fallen to around 4 times; among the 18 markets tracked by Bloomberg, the last time such a valuation appeared was in 2006. The index’s market capitalization exceeded $1 trillion at the start of 2026.

Goldman Sachs strategists estimate that current semiconductor valuations imply a 65% earnings drop for the sector in 2027, but they view this scenario as overly pessimistic. The non-memory chip segment accounts for about half of the KOSPI index and has a forward price-to-earnings ratio of 7.6 times.

Despite the latest target downgrade, Goldman Sachs remains optimistic about stocks related to power, industry, corporate governance, and companies benefiting from South Korea’s domestic reflation and Korean pop culture.