South Korea’s biggest memory-chip makers enter a crucial earnings week with profits booming and investor confidence fading, as doubts about the sustainability of artificial intelligence spending continue to weigh on valuations.
The KOSPI extended its sell-off on Monday, falling 1.08% to 5,490.60 by 9:50 am in Seoul, slipping below the 5,500 mark after closing Friday at 5,550.30.
The benchmark has lost more than 35% from its June peak. Samsung Electronics declined 1.3%, while SK Hynix fell 0.63%.
Yet Goldman Sachs sees roughly 62% upside for the broader index over 12 months, even after slashing its target by 25%.
Why Goldman still sees a bargain after cutting its target
Goldman strategists, including Timothy Moe, reduced their KOSPI forecast to 9,000 from 12,000 in an October 25 note. The revision reflects more conservative valuations, not expectations of collapsing profits.
“The market is pricing an overly negative fundamental outlook,” the strategists wrote.
The argument starts with valuations: the benchmark trades at about four times expected earnings over the next 12 months, a level rarely seen in major equity markets.
That multiple has shrunk because stock prices have fallen much faster than profit forecasts. Goldman calculates that current semiconductor valuations effectively anticipate a 65% drop in the sector’s 2027 earnings. It considers that outcome too severe.
However, there is an important distiction. The bank’s implied 62% upside applies to the KOSPI, not separate forecasts for Samsung or SK Hynix shares.
Its preferred opportunities extend beyond memory chips to power, industrial businesses and companies benefiting from corporate governance reforms.
Goldman’s optimism is therefore a bet on Korean equities more broadly, even as AI-related uncertainty persists.
Record chip profits are no longer enough to reassure investors
The earnings numbers explain why the sell-off looks so unusual.
Samsung’s preliminary guidance on October 8 projected third-quarter revenue of 195 trillion won and operating profit of 107.4 trillion won. Those figures remain estimates ahead of its full results.
Meanwhile, SK Hynix is forecast to deliver revenue of 98.23 trillion won and operating profit of 76.96 trillion won, according to FnGuide consensus.
Nevertheless, Samsung and SK Hynix shares ended Friday 18.2% and 25.4% below their September 1 levels.
Investors increasingly fear AI infrastructure spending could slow before huge investments generate sufficient returns. Higher financing costs and doubts about future memory demand have amplified those fears.
“Factors such as earnings or long-term supply contracts are already fully reflected in share prices,” Mirae Asset Securities analyst Kim Seok-hwan said, according to a Chosunbiz report on Friday.
His concern is that even exceptional results may fail to revive stocks if investors believe today’s memory-chip profits are nearing their cyclical peak.
Earnings and shareholder returns face their biggest test
SK Hynix reports on Wednesday, October 28, followed by Samsung on Thursday, October 29. Investors will assess order visibility, pricing, margins and cash generation alongside headline profits.
Capital returns may prove equally important. SK Hynix recently completed a 40 trillion won buyback, while Samsung finished a 15 trillion won programme. Both helped absorb selling pressure.
“We expect the company to have at least 30 trillion won in additional funds available for shareholder returns based on its FCF,” Hana Securities analyst Kim Rok-ho told The Korea Times, referring to SK Hynix.
Kim expects buybacks and share cancellations to carry greater weight than dividends.
Samsung faces constraints on further common-share cancellations and questions over its next shareholder-return policy. The company’s existing payout framework expires this year, complicating investors’ expectations.
Fresh commitments, backed by durable AI demand, could strengthen Goldman’s bargain argument. Weak guidance or limited payouts could deepen the sell-off.
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