Goldman Sachs KOSPI's goal of “high-altitude diving”: cut 12,000 points to 9,000 points, still insists that there is 60% room for improvement

Goldman Sachs Group strategists lowered the 12-month target point of Korea's KOSPI Index from 12,000 points to 9,000 points, a decrease of 25%. Previously, the bank raised its target several times this year. The reduction stemmed from growing market concerns about artificial intelligence (AI) transactions. Analysts led by Timothy Moe said in an October 25 report that after KOSPI fell more than 35% from the June peak, they used more conservative valuation assumptions. However, strategists believe that this round of sell-off has significantly undervalued the Korean stock market, and the revised target still means that there is more than 60% room for improvement compared to the current level.

Goldman Sachs last raised its KOSPI target in June of this year, and maintained the 12,000 point target when the index's constituent stocks declined due to the subsequent global AI sell-off. Chip-making giants such as Samsung Electronics and SK Hynix have made KOSPI a weather vane for AI transactions. Investors are increasingly concerned about the sustainability of the industry's large-scale infrastructure spending, rising financing costs, and signs of insufficient returns, and selling pressure has spread to the wider South Korean market.

A Goldman Sachs strategist wrote in the report: “The market is pricing a fundamental outlook that is too negative.” They said the downgrade was aimed at incorporating “more conservative assumptions about how the market might price fundamental fundamentals (underlying fundamentals),” but they still believe “at current levels, the market provides an attractive return on risk.”

The Korean stock market has changed from the hottest major market this year to the cheapest market in the world, and its valuation has dropped to about half of Indonesia's. According to compiled data, KOSPI's 12-month forward price-earnings ratio has dropped to about 4 times; among the 18 markets tracked by Bloomberg, the last time such a valuation appeared was in 2006. The market capitalization of the index surpassed $1 trillion in early 2026.

Goldman Sachs strategists estimate that current semiconductor valuations suggest a 65% drop in the industry's profit in 2027. They think this scenario is too pessimistic. The non-memory chip sector accounts for about half of the KOSPI index, and its forward price-earnings ratio is 7.6 times.

Despite the latest target cuts, Goldman Sachs is optimistic about stocks related to electricity, industry, and corporate governance, as well as companies benefiting from domestic re-inflation and K-pop culture.