[Edaily Reporter Park Soon-yeop] Meritz Securities has set a year-end target of 11,500 points for the KOSPI. While a short-term consolidation period is possible between the Computex trade show in Taiwan in June and the earnings season in July due to a lack of significant additional momentum, the firm believes the upward trend in the domestic stock market will remain valid in the second half of the year, considering the AI infrastructure investment cycle and the improving profit trend in the semiconductor sector.
In a report released on the 2nd, Meritz Securities’ Investment Strategy Team stated, “The upward trend will remain valid through the end of the year,” adding, “We set the year-end target for the KOSPI at 11,500 points.” The team expects the domestic stock market to take another step upward in the third quarter of the second half.
While there is a lack of clear momentum in June—from the conclusion of Computex in Taiwan until the July earnings season—the team believes that the third quarter could see a semiconductor-led re-rating of valuations. This is expected to be driven by a combination of semiconductor earnings announcements, the listing of SK Hynix’s American Depositary Receipts (ADRs), and expectations for next year’s demand.

The key rationale behind Meritz Securities’ projection of the KOSPI reaching the 11,500 level is earnings outlook. Meritz Securities estimated the KOSPI’s net profit for 2027 at 989.8 trillion won. This is 11.8% higher than the market consensus of 885.7 trillion won. The firm explained that the portion exceeding the consensus stems largely from semiconductor earnings forecasts. Meritz Securities analyzed that even if only earnings growth is factored in, the KOSPI could rise to the 9,900 level by year-end, and if a valuation re-rating is added to this, reaching the 11,500 level is possible.
The firm also saw room for further gains from a valuation perspective. Meritz Securities estimated the KOSPI’s return on equity (ROE) for 2027 at 24.1% and, based on this, calculated a fair price-to-book ratio (PBR) of 2.22 times. Applying this, the fair KOSPI index level is 11,763 points. Reflecting this, the firm set a year-end target for the KOSPI at 11,500 points. The report explained, “There is upside risk to the outlook if interest rates stabilize at levels lower than conservative assumptions or if profit estimates for the semiconductor sector are further revised upward.”
Meritz Securities interpreted the current AI rally driving the stock market not as a simple tech stock boom, but as the initial phase of an economic structural shift. It explained that the production structure is shifting toward an AI economy, following mass production in the early 20th century and the digital economy in the late 20th century, and that investments in data centers and AI factories represent the large-scale capital expenditures underpinning this shift. The analysis suggests that, just as large-scale infrastructure investments in railways, power grids, and telecommunications networks continued for extended periods during past industrial revolutions, AI is also forming a similar investment cycle.
The report specifically noted that the scale of AI infrastructure investment could be larger than that of the past PC and internet revolutions and may be closer to the scale seen during the electrification and mass production cycles. It estimated that the scale of AI data center investment in the U.S. will expand from 0.9% of gross domestic product (GDP) in 2024 to 2.5% by 2030. Meritz Securities assesses that, empirically, investment at around 1% of GDP is typical of an investment cycle driving a specific industry, but once it exceeds 2%, it reaches a level that impacts overall economic productivity.
The report also emphasized that the AI cycle is still in the early stages of a long-term uptrend. It assessed that the current rally in AI-led stocks began in 2023 and is now entering its fourth year. Although global leaders such as NVIDIA and domestic semiconductor stocks have already risen significantly, the analysis suggests that there is still room for growth in both duration and magnitude when compared to past revolutions such as electrification, mass production, and the railway and transportation revolutions. Meritz Securities stated, “While challenges to technology, concerns over infrastructure oversupply, and market momentum could trigger a correction, there is no doubt about the overall direction.”
However, it noted that the stock market is likely to take a breather in June. Regarding the U.S. stock market, the firm maintained its year-end target of 8,150 points for the S&P 500, while citing short-term overheating concerns and caution surrounding the June FOMC meeting as variables. For the domestic market, it noted that with limited additional momentum following Computex, the market could react sensitively to interest rate changes and policy events.
In terms of asset allocation, the firm recommended a 74% allocation to equities and a 26% allocation to bonds. Within the equity portfolio, it suggested a short-term tactical allocation of 29% to the U.S., 22% to China, and 23% to Korea. The firm believes that the AI tech boom and strong semiconductor performance are supporting global risk appetite. Conversely, regarding bonds, it recommended a conservative approach due to inflationary pressures driven by oil prices and the possibility of a domestic benchmark interest rate hike.
Recommended stocks included NVIDIA, Alphabet, IBM, Dell, Lenovo Group, Swen Electric, KODEX China Humanoid Robot, #SK Hynix, #Doosan Fuel Cell, and #NHN. Among domestic stocks, the firm highlighted SK Hynix’s rising HBM prices and the expansion of its investor base following its ADR listing; Doosan Fuel Cell’s demand for alternative power sources for U.S. AI data centers; and NHN’s potential for a turnaround in its cloud business as key investment points.
Meritz Securities noted, “June is a period where a short-term pause may occur due to a lack of momentum ahead of the July earnings season,” but emphasized, “Considering the decentralization of AI data centers, growing demand for on-premises AI servers, and profit improvements centered on semiconductors, the upward trend in the stock market remains valid through the end of the year.”