Goldman says this stock market is likely to outperform the US equity market index

Goldman Sachs says KOSPI is positioned to keep outperforming U.S. equity indices, supported by 2025 gains of +50% YTD and a record high after a 4.6% weekly rise. The bullish case rests on reshored retail flows, strong domestic ETF inflows, AI-driven semiconductor demand, earnings upgrades, and foreign buying into Korean tech. The article highlights memory chips and defense as the key 2026 upside themes for Korea.

Analysis

The cleanest second-order winner is not just Korean semis, but the entire domestic liquidity complex that gets fed by reshored retail capital and passive ETF rotation. That matters because local flows tend to be more price-insensitive than foreign hedge fund money, which can extend momentum in high-beta names even after fundamentals start to look crowded. In practice, this favors balance-sheet levered beneficiaries of a capex upcycle, while punishing U.S.-listed “AI beneficiaries” that depend on scarce global risk appetite rather than domestic savings reallocation.

The memory trade is also more than a cyclical semiconductor call: it is an earnings revision story with operating leverage. If AI server demand stays firm, the incrementally better pricing environment should spill over into equipment, substrate, packaging, and power infrastructure suppliers, creating a broader basket effect that can outperform pure-play chip names by 1-2 quarters. The market may still be underestimating how quickly a memory upcycle can re-rate Korean exporters when foreign ownership is already light and local flow support is persistent.

The main risk is that this becomes a crowded, consensus momentum trade just as global tech leadership narrows. A USD rebound, weaker AI capex guidance, or any sign that retail reshoring is peaking would hit the most crowded beta names first, likely within days, while the fundamental disappointment would show up over the next 1-2 earnings seasons. Another underappreciated risk is policy: if capital controls or tax benefits become politically controversial, the flow tailwind could fade faster than earnings can catch up.

Contrarianly, the market may be over-focusing on headline KOSPI strength and underpricing relative-value opportunities outside Korea. If memory pricing improves but the index continues to be dragged by crowded ownership in the obvious winners, the better expression may be long the enabling supply chain and short U.S. AI multiples that already embed flawless execution. That offers a cleaner hedge against a de-rating in high-duration tech while still participating in the semiconductor cycle.

Key Decisions for Investors

• Long KRX/KKR-style Korea equity exposure via KOSPI ETF or Korea tech basket for 1-3 months; use pullbacks of 3-5% to add, targeting a continuation of retail-flow momentum with 1.5-2.0x upside vs broad EM beta.
• Overweight memory leaders and upstream beneficiaries for 2-4 quarters; pair long a Korean semiconductor basket against short a U.S. AI hardware basket to express the cycle without paying peak U.S. duration multiples.
• Buy call spreads on Korean chip names or the KOSPI tech ETF into any 1-2 week consolidation; structure for asymmetric upside if foreign inflows re-accelerate, with downside capped to premium.
• Pair trade: long Korea domestic liquidity beneficiaries, short U.S. mega-cap tech ETF over the next 1-2 months if USD strengthens; this isolates the flow/repatriation theme from general AI enthusiasm.
• If memory pricing data rolls over for two consecutive months, reduce exposure aggressively; the trade is flow- and revision-driven, so a break in either variable can compress multiples quickly.