Goldman Sachs: AI storage chip demand is underestimated, South Korean stock market still has 80% upside potential

Goldman Sachs Group's Chief Asia-Pacific Equity Strategist Timothy Moe maintains a strongly bullish stance on the South Korean stock market, believing the market has seriously underestimated the duration of the AI-driven memory chip demand cycle. According to him, the South Korea benchmark index KOSPI still has nearly 80% upside potential, and he keeps his KOSPI target level unchanged at 12,000 points.

According to Bloomberg, Moe said in an interview last Friday, "The market has underestimated the duration of this earnings cycle," and he expects next year’s capital expenditure by large U.S. technology companies to surpass $1.2 trillion, far higher than the previous forecast of $800 billion.

This optimistic view stands in sharp contrast to recent market trends. Since its historical high in June, KOSPI has fallen a cumulative 27%. Despite chip giants such as Samsung Electronics and SK hynix reporting stellar results one after another, share prices have not been significantly boosted. Moe’s target level suggests that if his earnings projections are realized, the current valuation will provide investors with a significant margin of safety.

The Earnings Cycle Is Underestimated, Chip Demand Set to Heat Up Further

Moe’s core argument is that the market systematically underestimates the duration of the earnings cycle for South Korean memory chip companies. He expects KOSPI component stocks’ earnings growth rate to be around 360% this year and to slow to about 35% by 2027, but he emphasizes that the eventual slowing of earnings growth has already been fully priced in by the market and is not a reasonable explanation for the current weakness in stock prices.

The global data center construction boom is the key driving force behind this view. Moe points out that large-scale expansion of data centers has already caused severe shortages of storage and memory chips, driving chip prices continuously higher, and that this supply-demand imbalance is expected to intensify further in 2027. He states that hyperscale cloud computing companies "must continue to invest, even if they cannot be profitable in the short term," and that the explosion in computing power demand is incredibly memory-intensive, directly benefiting memory chip manufacturers.

Valuations at Historical Lows, Target Level Supported

From a valuation perspective, Moe believes the current pricing of KOSPI has fully reflected pessimistic expectations, and may even be excessively discounted. His 12,000-point target is based on a 7.5x expected price-to-earnings ratio, while KOSPI is currently trading at only 5.3x expected P/E, about half the average of the past seven years.

Moe says that if Korean companies can achieve his earnings forecasts, the 12,000-point target "is not as aggressive as it appears on the surface." When this target was set three months ago, it was already one of the most aggressive forecasts in the market. Yet Moe makes it clear he will continue to adhere to this view, with the core logic anchored in the ability to deliver on earnings.

Moe does not shy away from potential risks. He acknowledges threats from competitors, including the rise of companies such as ChangXin Memory Technologies, as well as the potential political resistance within the United States to large-scale data center expansion—both are sources of uncertainty. Nevertheless, he believes these risks are unlikely to shake the fundamental advantages of advanced memory chip makers in the coming years. In his view, the structural demand from AI infrastructure investment will continue to dominate the industry's trajectory, and the technological barriers of South Korea’s leading chip companies in advanced processes such as high-bandwidth memory will enable them to keep benefiting from this wave of demand.