Recent volatility in South Korea‘s stock market has failed to shake Goldman Sachs‘ confidence. Regardless of sharp swings in AI-linked chip stocks and growing concerns that the rally has become too concentrated, the investment bank expects the benchmark Kospi index to rise more than 20% over the next 12 months. It believes gains will spread beyond semiconductor stocks as more sectors report stronger earnings.
South Korea was one of Asia’s best-performing equity markets in the first half of 2026, with the Kospi nearly doubling. However, the rally has faced pressure in recent weeks after sharp fluctuations in major chip stocks tested investor confidence.
Rally expected to go beyond chip stocks
Much of this year’s market rally has been driven by AI-related gains in Samsung Electronics and SK Hynix, raising concerns that the market has become too dependent on a few companies. Goldman Sachs, however, expects the rally to increase in the second half of the year as sectors such as energy, materials and industrials show improving earnings.
“Earnings momentum is increasingly improving across other sectors,” the analysts wrote in a note on Sunday. The bank also said foreign investors have already started shifting money into companies outside the AI memory-chip space.
“Incremental foreign inflows have already begun rotating toward other AI-related beneficiaries and industrials, and we expect this trend to continue as investors seek exposure to the broader AI supply chain and opportunities that are uncorrelated with AI,” the analysts wrote.
Goldman says market is not overheating
The investment bank dismissed concerns that the market rally has become overly speculative. Although retail investor activity has increased, Goldman said overall exposure remains well below levels usually seen during overheated markets.
“Retail activity has risen, but investor exposure remains well below levels typically associated with market excess,” the analysts wrote. The bank also said headline margin-loan data may exaggerate investor risk because much of the growth in leveraged exchange-traded fund (ETF) assets has come from rising share prices rather than fresh borrowing.
Households still have money to invest
Goldman said South Korean households are still not fully invested in domestic equities, leaving room for more money to enter the market. “Korean households continue to maintain property-skewed portfolios rather than exhibiting all-in positioning toward domestic equities,” the analysts wrote.
According to the bank, households continue to hold a large share of their wealth in real estate, cash and overseas investments, particularly US stocks. If market conditions remain favourable, more of that money could move into South Korean shares.
Strong earnings support bullish outlook
Goldman expects corporate earnings to remain strong, forecasting profits to grow by 320% this year and another 35% in 2027.The bank also said stock valuations outside Samsung Electronics and SK Hynix remain attractive compared with other markets in the region. Goldman expects the Kospi to reach 12,000 over the next year, implying more than 20% upside from current levels. However, it warned that investors should expect volatility along the way, saying the market is likely to take a “bumpy path.”