Suryaa Business Desk: Surya International Business Bureau, Seoul/New York: South Korea's stock, which has recently surged on artificial intelligence (AI) driven semiconductor demand... Surya International Business Bureau, Seoul/New York: AI Fatigue is slowly creeping into South Korea's stock markets, which have been buoyed by artificial intelligence (AI)-based semiconductor demand. International brokerage giant Goldman Sachs has sharply cut its next 12-month target for Korea's main stock index KOSPI. Weaker-than-expected growth trends in the semiconductor sector, lower peak expectations in the technology sector and global trade uncertainties were the main reasons for the cut.
Concerns haunting the AI sector: Over the past two years, the Korean equity market has registered a massive rally, led by memory chip giants like Samsung Electronics and SK Hynix. But the lack of immediate return on investment (ROI) commensurate with tech companies' huge investments is fueling doubts in the markets. Increasing competition for market leadership in the high-bandwidth memory (HBM) chip segment, coupled with less-than-expected memory demand from the traditional PC and smartphone segments, is putting pressure on Korean manufacturers' margins. Goldman Sachs Estimates – Key Reasons Behind Rating Change: Goldman Sachs has revised its outlook on Korean stocks as the global semiconductor cycle shows signs of entering a slowdown.
Global investors are adopting a defensive stance as Korean companies cut profit growth expectations for the coming quarters, the report said. Fluctuations in the Korean Won currency against the dollar and uncertainty in global economic growth will also affect the performance of Korean export-oriented companies. Economists analyze that unless the expansion of AI-based infrastructure reaches a stabilization phase in the near future, it will be a challenge for the market to regain its peak levels.