South Korea stock market is captivating global investors, having already doubled this year, and now Goldman Sachs predicts an additional 40% surge. This bullish forecast, detailed in a recent report by chief portfolio strategist for Asia, Tim Moe, sees the KOSPI index climbing to an unprecedented 12,000.
Moe’s revised target, a significant jump from his earlier 7,000 objective set amidst the Iranian crisis, underscores the extraordinary performance of South Korean equities. The KOSPI, which closed at 8,801 on Wednesday, has comfortably surpassed previous expectations, driven by phenomenal corporate earnings growth.
Driving the South Korea Stock Market Rally: Semiconductor Giants
The primary catalyst behind this remarkable rally is the spectacular earnings performance of South Korea’s dominant memory chip manufacturers: Samsung Electronics and SK Hynix. These two industrial behemoths collectively constitute nearly half of the KOSPI index, making their financial health a critical determinant of the market’s trajectory.
Their earnings prospects show no signs of abating. Further impetus came from Nvidia CEO Jensen Huang, who, at a recent tech conference in Taipei, publicly urged SK Hynix to “Please Make More” high-bandwidth memory chips. Nvidia, a major buyer of these crucial components from both Samsung and SK Hynix, signals robust, sustained demand for semiconductor memory.
This relentless demand has fueled dramatic revisions in earnings forecasts. At the beginning of 2026, consensus earnings per share (EPS) growth for the South Korean market stood at a respectable 48%. Today, that figure has skyrocketed to an astonishing 277%. Moe has further elevated his 2026 earnings growth estimates to 320% (up from 300%) and boosted his 2027 outlook to 35% (from 28%).
“The demand for compute is growing faster than supply can respond, the market continues to underprice the likely duration of the semiconductor memory cycle.”
Despite the significant gains, Moe argues that the market remains undervalued. Even if the KOSPI reaches 12,000, it would still trade at only 8 times forward earnings. He contends that the market’s current valuation of 5 times forward earnings suggests skepticism about the longevity of the supply-demand imbalance in memory chips.
Undervalued Potential and Future Catalysts
Moe believes the market is underestimating how long the supply-demand mismatch in memory chips can persist. This undervaluation presents potential catalysts for further rerating, particularly if the government-led ‘Value-Up program’ continues to advance. This initiative aims to enhance corporate governance standards and better safeguard minority shareholders, which could attract greater foreign investment and boost valuations.
Historically, during market peaks, the median price-to-earnings (P/E) ratio for the KOSPI was 10 times, compared to the current 8.2 times. Even during market troughs, the median valuation stood at 11.4 times. Moe calculates that any tactical correction in the KOSPI would likely see downside limited to around 7,800, reinforcing his bullish stance.
While the South Korea stock market has led global performance with a 127% year-to-date return, Taiwan, another market heavily exposed to the AI theme, has also performed exceptionally well. Goldman Sachs has similarly upgraded its EPS growth forecasts for Taiwan’s TWSE benchmark to 48% in 2026 and 30% in 2027, driven by the AI boom’s benefits to giants like Taiwan Semiconductor Manufacturing Co. (TSM). Consequently, Goldman Sachs has set a new TWSE target of 51,000, upgrading its recommendation to overweight.
The current momentum in South Korea, fueled by robust semiconductor demand and strong earnings, positions the KOSPI for sustained growth. Investors should closely monitor these developments, as Goldman Sachs’s optimistic outlook suggests significant upside potential remains for this dynamic Asian market.
