KB Securities has raised its target for the KOSPI's year-end level to 10,500 points, an upward revision of 40% tied to what the firm describes as earnings upgrades led by artificial intelligence activity. The firm made the change as the South Korean benchmark pushed to successive record highs in recent trading, only for the index to later retrace.
KB strategist Euntaek Lee characterized the current rally as "faster and stronger" than Korea's well-known "three lows" bull market of 1986-89, which produced an eightfold return over four years. The firm upgraded its outlook a day before the index fell more than 6% on Friday, pulling back from a record above 8,000 points.
At the center of KB's case is what it calls AI-led earnings upgrades. Lee noted that profit estimates for the KOSPI are rising at a rate that outpaces the index itself, a dynamic that helps relieve valuation pressure even as prices climb. Based on KB's projections, KOSPI operating profit is expected to triple on a year-on-year basis to 919 trillion Korean won in 2026, and then advance further to 1,240 trillion won in 2027.
Those aggregate numbers are not evenly distributed across the market. KB highlights Samsung Electronics and SK Hynix as the primary engines behind the forecasted jump in index-wide earnings. Combined operating profit for those two names is projected to move from 91 trillion won in 2025 to 630 trillion won this year, and then to 906 trillion won in 2027, accounting for a large portion of the overall increase.
Lee framed memory chips as more than cyclical commodities, calling them "scarce strategic assets" that are central to AI infrastructure performance. He anticipates an evolution of the AI market from its present agentic stage toward what KB labels an AI 3.0-era of physical AI beginning in 2028, a shift the strategist says would indicate a stronger and more sustained demand trajectory for memory content.
While KB's outlook is decidedly bullish over the medium term, it does not rule out near-term volatility. Lee flagged the possibility of a correction around June, but suggested such a pullback would likely be smaller than the roughly 20% drawdown the market experienced in March. He identified two specific conditions that, in his view, would be necessary to interrupt the broader rally - an economic-cycle breakdown or a sharp increase in interest rates.
"The odds of either emerging near term (three-six months) appear low," Lee wrote. He added that he views any near-term pullback largely as a short-term correction driven by overheating, while warning that some market participants remain concerned about a bubble collapse. "Bull markets do not collapse only because indices rise sharply, though caution is warranted," he wrote.
The note from KB therefore combines a confident medium-term earnings thesis, concentrated in a small number of very large firms, with acknowledgment of short-term vulnerability and specific downside triggers. For investors and market participants, the dynamics described by KB underscore how much near-term index performance and valuations depend on the profit trajectories of the largest components of the benchmark.
Implications at a glance
- AI-driven upgrades are central to KB's revised KOSPI target and valuation narrative.
- Projected index-wide profit gains are heavily concentrated in Samsung Electronics and SK Hynix.
- Near-term corrections remain possible, but KB sees major economic or interest-rate shocks as the principal derailers.