Goldman Sachs keeps bullish Korea equity view after AI-linked selloff

Goldman Sachs said the recent selloff in South Korea's Kospi has pushed implied expectations for the memory-chip sector to excessively pessimistic levels, while leaving its 12-month 12,000 target and overweight rating unchanged. The bank said the index fell 39% from its June 22 peak before surging 17.9% on July 31, its biggest one-day gain on record, and argued the drop reflected worries about the durability of the memory cycle rather than a fundamental deterioration. Goldman said those concerns were amplified by passive selling from leveraged ETFs and follow-on selling by short-term momentum investors. It added that technical conditions have improved as leveraged ETF assets shrank, margin exposure fell, regulation tightened and hedge fund positioning eased, leaving a cleaner market structure for a recovery. The bank pushed back against three key bearish arguments on memory. It said talk that Nvidia may reduce the HBM content in Rubin Ultra points instead to a structural HBM supply bottleneck, with HBM remaining one of the tightest components in the AI supply chain. On SK Hynix, Goldman said the company's long-term agreement strategy tied up capacity on older HBM3E lines, contributing to a second-quarter DRAM market share drop to 26%, while Samsung rose to 39% and Micron narrowed the gap with SK Hynix to 1 percentage point; the next phase of competition, Goldman said, will depend on how quickly SK Hynix can switch production lines. On NAND, Goldman said profit-taking followed a narrative of results beating expectations but falling short of market hopes, even as consumer and edge-computing businesses dropped 32% quarter on quarter and management pointed to a meaningful recovery only in 2027. Goldman maintained its broader constructive view, arguing that DRAM process scaling is nearing its limits, with 10-nanometer technology potentially the last node, while falling yields and rising capital expenditure could structurally support the memory cycle. It also highlighted two demand-side positives: CXMT has rejected Apple's request for price cuts and is pricing in line with Samsung and SK Hynix, while DeepSeek is planning substantial price increases, which Goldman said may signal the end of ultra-cheap subsidized AI inference.