[Edaily Reporter KIM JUNG YOU ] Goldman Sachs has cut its target for South Korea’s KOSPI index—which it had raised several times this year—by as much as 25%. This move comes amid growing concerns over investments in artificial intelligence (AI).

According to Bloomberg on the 25th, Goldman Sachs analysts, including Timothy Mo, lowered their 12-month target for the KOSPI from 12,000 to 9,000. They explained that they applied a more conservative valuation, taking into account the fact that the index has plummeted more than 35% from its peak in June.

Goldman Sachs stated that the Korean stock market is significantly undervalued due to the recent sell-off, adding that even the revised target implies upside potential of more than 60% compared to current levels.

Goldman Sachs last raised its KOSPI target in June. It had maintained the target at 12,000 even as index constituents plummeted amid the global AI sell-off that began at the end of that month.

SamsungElectronics(005930)Driven by major semiconductor companies such as SK hynix(000660), the KOSPI has served as a barometer for AI investments. Amid uncertainty over whether massive infrastructure investments are sustainable and whether they will generate sufficient returns, investor concerns have grown over rising funding costs in the AI sector, and the KOSPI has also taken a hit.

In a report released today, Goldman Sachs analysts assessed that “the market is pricing in an overly negative outlook on fundamentals.” Regarding this target price reduction, they explained, “It reflects more conservative assumptions about how the market will evaluate underlying fundamentals,” adding, “Nevertheless, we believe the Korean stock market offers an attractive risk-reward profile at current levels.”

According to Bloomberg data, the KOSPI’s 12-month forward price-to-earnings ratio (P/E), which started the year at a value of over $1 trillion, has fallen to about 4 times. Goldman Sachs analysts estimate that the current valuation of the semiconductor sector reflects a scenario of a “65% decline in sector earnings next year,” which they deemed overly pessimistic. Stocks outside the memory sector—which accounts for about half of the index—are trading at 7.6 times forward earnings.

Despite this downward revision, Goldman Sachs stated that it continues to identify investment opportunities, particularly in the power, industrial goods, and corporate governance sectors, as well as in companies benefiting from the domestic economic recovery and Korean pop culture.