Goldman Sachs said recent volatility in South Korean equities has pushed market expectations for memory-chip fundamentals into overly pessimistic territory, with implied pricing now worse than what the firm sees in the underlying business.
In a report on Aug. 7, Justin Park, a trader at Goldman Sachs’ Seoul office in Asia, said the strength and duration of the current memory cycle could exceed previous periods. Goldman kept its overweight stance on South Korea and left its 12-month KOSPI target unchanged at 12,000.
The report said the KOSPI had at one point dropped 39% from its June 22 high. On July 31, the index surged 17.9% in a single session, marking the biggest one-day gain on record.
Goldman says the selloff did not reflect a real deterioration in fundamentals
According to the report, the sharp fall in the KOSPI was not caused by a material worsening in fundamentals. Goldman said the move started with concerns over how long the memory cycle could last, then intensified through passive selling by leveraged ETFs and follow-through selling from short-term momentum investors.
On the technical side, the firm said conditions have improved. It pointed to a contraction in leveraged ETF size, lower margin exposure, tighter regulation and reduced hedge fund positioning. In Goldman’s view, the shareholder base and positioning are now cleaner, which sets up the market for a recovery.
Three major bearish concerns addressed
Concern one: reported lower HBM configuration for Rubin Ultra
Goldman took the opposite view on concerns that Nvidia may lower the HBM configuration in Rubin Ultra. The bank said that move would actually reinforce the case for a structural supply bottleneck in HBM. It described HBM as the most supply-constrained core component in the AI supply chain, adding that availability will be a key limiting factor for global AI expansion.
Concern two: the opportunity cost of SK hynix’s LTA strategy
The second concern centered on the opportunity cost tied to SK hynix’s LTA strategy. Goldman said a large amount of capacity has been tied up on older HBM3E lines, leading SK hynix’s DRAM market share to fall to 26% in the second quarter. Samsung moved back into the top spot at 39%, while Micron narrowed the gap with SK hynix to just 1 percentage point.
Goldman said SK hynix’s next phase of competitiveness will depend on how quickly it can complete its line transition.
Concern three: the NAND narrative and delayed recovery
The third concern came from profit-taking tied to a NAND narrative that was better than expected but still below market hopes. The report said consumer and edge-computing businesses fell 32% quarter over quarter, while management expects a meaningful recovery only in 2027.
Still, Goldman argued that DRAM process scaling is nearing saturation, with 10 nanometers potentially becoming the final node. The bank said lower yields and sharply rising capital expenditure should structurally support a constructive view on the memory cycle.
Two positive signals on the demand side
Goldman also pointed to two supportive demand signals. First, CXMT has rejected Apple’s request for price cuts, with pricing now comparable to Samsung and SK hynix. Second, DeepSeek is planning a “significant” price increase. Goldman said that suggests the era of ultra-low-priced, subsidized AI inference is coming to an end.