Korean chip stocks trade at 2.8x earnings after the Kospi's 44.5% fall, and Goldman says they could double
What's the deal? Goldman SachsDealroom has a profile for this one. Try Dealroom → says South Korean semiconductor stocks could climb to twice their current levels after a steep selloff, arguing the market has overpriced fears of collapsing earnings. The call follows a 44.5% drop in the KOSPI from its June peak, a decline the bank compares to the 52% dot-com crash and 53% slide during the global financial crisis.
What's behind the numbers? The KOSPI semiconductor index trades at 2.8 times forward earnings, against a 20-year mean of 9.9x, per Quantiwise and Goldman data. Goldman says current prices already bake in a scenario where the market's 2027 earnings estimates are cut by about 70%.
Why now? Foreign selling concentrated in technology shares as worries over data-centre regulation grew after the US midterm elections. The broader KOSPI fell about 12% last week, yet 12-month forward earnings-per-share estimates were revised up 3.4%, a sign that anxiety over future growth, not current results, is driving the selloff.
The divergence is stark against the companies' fundamentals. SK hynix reported record third-quarter profit and said DRAM and HBM supply is effectively booked through 2029, while Samsung ElectronicsDealroom has a profile for this one. Try Dealroom → also posted record results.
What could go wrong? Goldman's doubling scenario is conditional, not a guarantee. It depends on the market's unusually high earnings forecasts holding up and on the historical link between return on equity and price-to-book ratio being restored.
In late October the bank had already cut its 12-month KOSPI target from 12,000 to 9,000, a 25% cut, while keeping an overweight stance on Korean equities; strategists led by Timothy Moe said the market was pricing in an overly negative outlook for fundamentals, as CNBC reported.
The signal: Samsung and SK hynix make roughly two-thirds of the world's memory chips and are seen as the picks-and-shovels trade of the AI boom, making Korea a leading indicator for sentiment on AI spending. With valuations near crisis lows but profits at records, the gap reflects a market betting against the durability of the data-centre buildout rather than the chipmakers themselves.
Private markets tell a different story. While listed AI hardware sells off, private AI valuations keep climbing: Dealroom's AI-mogging analysis finds six AI startups, including Mercor and Lovable, now worth more than the listed rivals they compete with.
Read more: Seoul Economic Daily, CNBC
Photo: Korea Exchange headquarters in Busan. hyolee2 / Wikimedia Commons, CC BY-SA 3.0.
