SKHY, BABA in the Crosshairs: Goldman Slashes KOSPI Ahead of Earnings, Morgan Stanley Warns on China AI

Asian equities face pressure as Goldman Sachs has reduced its target for South Korea’s Kospi Index ahead of SK Hynix Inc. (NASDAQ:SKHY) earnings, while Morgan Stanley projected a downside for Chinese equities amid artificial intelligence (AI) hardware tensions.

Goldman Sachs Lowers Kospi Target

According to a report by Bloomberg, Goldman Sachs strategists, including Timothy Moe, reduced the Kospi Index’s target from 12,000 to 9,000, projecting a 25% downside.

Strategists wrote in an Oct. 25 note that "The market is pricing an overly negative fundamental outlook.” Highlighting the downward revision as the incorporation of more “conservative assumptions,” Goldman noted that the markets still offer attractive risk/reward at current levels.

Kospi has declined by 39.66% from its June 19 peak of 9,063.84 points to Monday’s close at 5,469.47 points, amid AI spending concerns.

This revision occurs as South Korean semiconductor companies prepare to announce third-quarter earnings, with SK Hynix scheduled for Oct. 28 and Samsung Electronics on Oct. 29.

Morgan Stanley Flags China AI Risks

Before its valuation reaches a bottom, Morgan Stanley analysts simultaneously projected that Chinese offshore shares could decline by another 10% to 15%.

According to another Bloomberg piece, MS analysts, including Laura Wang, stated that the selling concerns amid the Chinese market correction were caused by “trust tax, pressure on e-commerce, a weakening macro, and elevated global market volatility.”

Morgan Stanley favors onshore shares, saying they have a "bigger concentration in the higher revenue and earnings growth segments in AI-related, hard-core technology and innovation companies."

AI Supply Chain Pressures

These market corrections align with shifting AI supply chains. U.S. restrictions on high-bandwidth memory (HBM) and manufacturing equipment are limiting China’s AI chip production, according to Christopher Tang, a professor at the UCLA Anderson School of Management. China accumulated an estimated 13 million HBM stacks before U.S. controls took effect, but those reserves are depleting, Tang said. –

Meanwhile, Chinese technology giants including Alibaba Group Holding Ltd. (NYSE:BABA) and Tencent Holdings Ltd. (OTC:TCEHY) reportedly placed more than $35 billion in chip orders with Nvidia Corp. (NASDAQ:NVDA).

According to Shay Boloor, chief market strategist at Futurum Equities, “Every restriction also gives Chinese suppliers a larger captive market and stronger incentive to replace foreign technology.”

Image via Shutterstock