South Korean Stocks Rally on Tight Chip Supply, Bullish Goldman Sachs Outlook

South Korean equities and related exchange-traded funds (ETFs) gained on Tuesday, with the benchmark KOSPI index rising above the 7,000-point level for the first time in 15 trading days. The rally was fueled by investor enthusiasm for the artificial intelligence sector and growing concerns over a tightening supply of memory chips from the country's leading semiconductor manufacturers.

AI Demand and Supply Crunch

The market's upward momentum follows the release of OpenAI's Astra model, which has reignited optimism around the AI infrastructure build-out, with memory chips seen as a primary beneficiary. This demand-side catalyst coincides with a significant supply-side constraint, according to a recent report from the South Korean firm KB Securities.

The report warned that memory inventories at industry giants Samsung Electronics (KS:005930) and SK Hynix (KS:000660) have fallen to less than 10 days in the current quarter. This critically low level suggests the world's top memory producers have limited capacity to meet any sudden surges in demand, potentially exacerbating a global storage shortage.

Reflecting this sentiment, Hong Kong-listed leveraged ETFs saw significant gains. The CSOP SK Hynix Daily (2x) Leveraged Product (7709.HK) jumped 7.6%, while the CSOP Samsung Electronics Daily (2x) Leveraged Product (7747.HK) rose 4.73%.

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Goldman Sachs Reaffirms Bullish Target

Adding to the positive sentiment, Goldman Sachs reiterated its highly bullish outlook for the South Korean market. Timothy Moe, the bank's chief Asia-Pacific equity strategist, confirmed his firm's 12,000-point target for the KOSPI index, which implies nearly 80% of potential upside from its current level.

Moe stated that the market is systematically underestimating the duration of the AI-driven demand cycle for memory chips. Goldman Sachs has substantially increased its forecast for capital expenditures by large U.S. technology companies to $1.2 trillion for the next year, predicting that the data center expansion will intensify the memory chip shortage into 2027.