Experts said Korea's stock market will enter a full-fledged "earnings-driven rally" led by artificial intelligence (AI) this year. Optimism is growing that the KOSPI will climb to 5,000 points for the first time ever, as listed companies' report cards drive the index higher beyond mere expectations.
In particular, with the semiconductor sector accounting for more than half of the total increase in listed companies' profits, AI-related stocks centered on semiconductors are expected to lead the market higher in the new year.
The securities industry estimates operating profit for KOSPI-listed companies this year at about 397 trillion won, up 38% from last year. The point to watch is the "contribution" to profits. According to Mirae Asset Securities, of the roughly 111 trillion won increase in total profits, the semiconductor sector's contribution is expected to reach 68 trillion won. In effect, semiconductors alone are pulling Korea's stock market higher.
The market is even projecting that the combined operating profit of Samsung Electronics and SK hynix will exceed 200 trillion won next year. As the focus of AI computing shifts from "training" to "inference," a simultaneous boom is expected across all layers of memory—including HBM, DRAM and NAND. According to Samsung Securities, the semiconductor sector's return on equity (ROE) next year is expected to rise to around 21%, comparable to past boom periods.
◇ "Sovereign AI, neo-cloud" join in… demand to extend as investment players diversify
A notable recent shift is that the investors behind AI are becoming more diverse. While "hyperscalers" such as Google and Meta, which provide large-scale AI infrastructure services, view "underinvestment" as the biggest risk and are pushing aggressive capital expenditures (CAPEX), major countries have entered a technology hegemony race, and "sovereign AI" investments led by governments in the United States, Europe and the Middle East are also rapidly increasing.
Particularly, investors at the national level are relatively less sensitive to price, and are seen as a factor that will lengthen the existing AI investment cycle. Lee Sang-yeon, a researcher at Shinyoung Securities, said, "Given that semiconductor cycles typically lasted more than two years, 2026 will be the year when the supercycle triggered by the AI revolution is proven in numbers," adding, "It is hard to doubt semiconductors that can be proven with numbers."
Meritz Securities focused on the "neo-cloud," which has emerged as a new source of demand. With the rise of neo-cloud operators specialized in AI computation, demand for memory semiconductors will be further stimulated, it said. Neo-clouds focus on supplying GPU clusters and offer rents at about half the level of traditional clouds, counting high-growth AI startups such as CoreWeave and Lambda as key clients. As investors expand from large big tech to specialized operators, demand for AI Semiconductor is expected to extend beyond a short-term cycle.
On the supply side, however, there is limited room to expand memory capacity. Meritz Securities estimated next year's DRAM production growth rate at only 8% to 13%. With equipment prioritized for high-bandwidth memory (HBM), which has high profitability, an analysis also suggested that shortages of standard DRAM and NAND flash centered on eSSD will continue through the end of next year.
In addition, there are structural constraints whereby significant time lags occur between securing production space and making new investment decisions. As a result, it is not easy to expand supply in the short term. Ultimately, as demand diversification and supply constraints intersect, the profit cycle for the semiconductor industry is expected to last longer than the market anticipates.
◇ AI bubble talk? "It is still time to enjoy it"… but sift by profitability
Many experts say that talk of a potential AI bubble burst is premature. For an overly inflated bubble to burst, both earnings deterioration and rising debt risks must occur simultaneously, but profit growth at major AI corporations is expected to continue through 2028.
Lee Kyung-min, a researcher at Daishin Securities Co., said, "As long as earnings growth continues through 2028 and the rate-cut cycle lasts through the first half of this year, it is early to seriously discuss an AI bubble," adding, "For now, this is a period to enjoy the AI boom rather than fear a bubble."
However, sifting the good from the bad among individual stocks is inevitable. Companies must persuade investors by proving that heavy facility investments can translate into profitability. Lee Woong-chan, a researcher at iM Securities, said, "Asset prices are currently elevated on AI expectations, but profits are still at the capital expenditure stage," adding, "Large-scale fundraising will inevitably lead to expenses through depreciation."
Lee added, "Corporations whose financial conditions worsen due to investment burdens, or that fail to deliver innovative outcomes relative to expense outlays, could be hit if controversy erupts over halting rate cuts going forward," while noting, "That said, as Google rebounded this year after its AI capabilities were reassessed, corporations that prove real competitiveness will emerge as new winners."
◇ AI tailwinds for IT and power equipment as well… shipbuilding and defense enter an earnings "harvest season"
The dominant view is that the growth momentum sparked by AI will spread beyond semiconductors to IT components and the broader power infrastructure. In particular, IT companies responsible for key materials—such as substrates, multilayer ceramic capacitors (MLCC) and copper-clad laminates (CCL)—within the supply chains for Google's tensor processing units (TPU) and Nvidia's graphics processing units (GPU) are likely to benefit. Samsung Securities cited Samsung Electro-Mechanics, ISU Petasys and Doosan as beneficiaries.
With data center power demand surging, earnings improvement in the power equipment sector is also noteworthy. While AI adoption expands and global data center investment increases, power consumption is soaring, but the pace of power infrastructure expansion is not keeping up. In fact, while global data center investment rose 29.7% from a year earlier, power infrastructure investment increased only 2.5%, Samsung Securities analyzed.
Accordingly, a global expansion of power infrastructure investment to ease power shortages appears inevitable. The market points to Korea Electric Power Corporation and power equipment maker HD Hyundai Electric, which are related to nuclear power, as representative beneficiaries. However, the scale of earnings improvement in these sectors is likely to be closely linked to whether big tech corporations continue infrastructure investment and to their earnings trajectories.
The shipbuilding and defense sectors will enter a full-fledged "harvest season" next year in which earnings are confirmed in numbers, backed by large order backlogs. In shipbuilding, new orders are showing some slowdown, but earnings visibility is high thanks to secured volumes, and a strategy of re-rating corporate value centered on warships is seen as valid. The securities industry gave high marks to the growth potential of HD Hyundai Heavy Industries, HD Korea Shipbuilding & Offshore Engineering and Hanwha Ocean.
The defense industry is also expected to see mid- to long-term growth, with momentum from orders for K2 tanks for the Middle East and export pipelines pending for countries such as Romania and Saudi Arabia amid a global trend of increasing defense spending. Securities firms' recommended stocks include Hyundai Rotem and Korea Aerospace Industries.