Goldman Sachs says South Korea's red-hot stock rally still has room to run

• Goldman Sachs calls South Korea its top market in Asia and raised its Kospi target to 9,000.
• AI-driven demand for memory chips has supercharged South Korea's hot market.
• Goldman says South Korean stocks still look attractive despite one of the world's hottest rallies.

South Korea's stock market has already staged one of the world's most stunning rallies this year, but it's not done yet, according to Goldman Sachs.

In a note published Wednesday, the bank called South Korea its "highest conviction view" in Asia, with an overweight call. Analysts raised their 12-month target for the country's benchmark Kospi index from 8,000 to 9,000.

The Kospi is trading around 7,400 after powering past the key 7,000 level earlier this week, capping a bull run that has pushed the index up around 77% this year so far.

The rally that made the Kospi one of the world's best-performing markets has been driven largely by AI-fueled demand for memory semiconductors, a sector dominated globally by Samsung Electronics — a newly trillion-dollar company — and SK Hynix.

"The prospect of sustained high profits for the semiconductor memory sector suggests the market is mispricing the durability of earnings," wrote Goldman's analysts in a note on Thursday.

That setup remains attractive because South Korean stocks still trade at relatively modest valuations even after the recent surge, they added.

Goldman now expects hardware and semiconductor stocks to drive South Korean corporate earnings growth of 300% in 2026.

"Record supply shortfall in both DRAM and NAND relative to strong demand growth driven by hyperscaler investment is resulting in sharply increasing memory prices," Goldman wrote, referring to the two dominant types of chips used in AI servers and data centers.

The firm said the rise of compute-intensive AI agents and long-term supply agreements could support "higher-for-longer profitability" for memory producers.

Goldman's bullish call comes as investors increasingly debate whether the AI trade is becoming overcrowded after a massive run in US tech stocks.

Kospi's explosive gains — the index has more than tripled since the start of 2025 — mark a dramatic reversal for a market long weighed down by the so-called "Korea discount," which Seoul has spent years trying to unwind through corporate governance reforms and shareholder-friendly policies.

Those efforts have coincided with the global AI spending frenzy that has drawn billions of dollars into South Korean equities from both domestic retail traders and foreign investors.