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2027 Peak and 2028 Transition Crossroads

Behind the strong optimism for the Korean market, with US investment bank BofA (Bank of America) mentioning the 'KOSPI 8000 era,' lies not just a simple economic recovery but a new semiconductor supercycle triggered by artificial intelligence (AI). Global financial institutions such as Goldman Sachs, Morgan Stanley, and JP Morgan are successively raising their target prices for the Korean stock market in the same context. The key they are focusing on is the structural growth of the AI memory industry, centered around Samsung Electronics and SK Hynix.

While past semiconductor booms were driven by a single demand, such as the spread of PCs and smartphones, the current AI semiconductor market has a multi-layered demand base including data centers, cloud computing, generative AI, AI agents, autonomous driving, robotics, industrial automation, and defense AI. Therefore, this cycle is evaluated as being much longer and larger in scale than previous ones. In particular, HBM (High Bandwidth Memory), which is essential for AI servers, is virtually monopolized by Samsung Electronics and SK Hynix in the global market. As global big tech companies like Nvidia, AMD, Microsoft, Amazon, Google, and Meta jump into the AI infrastructure competition, Korean semiconductor companies are facing the strongest demand environment in history.

2027: The Peak of the AI Supercycle

2027 is likely to be the year when the Korean semiconductor industry passes the peak of this AI supercycle. The most significant variable currently attracting market attention is the expansion of AI data center investments. As generative AI evolves beyond simple chatbots to AI agents that perform actual tasks, companies' AI infrastructure investments are increasing faster than expected.

AI CAPEX by US big tech companies has already reached hundreds of trillions of won annually, and sovereign wealth funds in the Middle East, European countries, Japan, and India are all joining the race to build large-scale AI data centers. Amidst this trend, the shortage of HBM supply is likely to persist until 2027. SK Hynix has established itself as a leader in the HBM market, and Samsung Electronics is also focusing all its efforts on expanding HBM4 supply. While both companies have expansion plans, if the pace of AI demand growth is faster, the market could continue to experience supply shortages.

What investors should pay attention to during this period is the time lag between stock prices and earnings. Historically, in the semiconductor industry, stock prices move ahead of earnings. In the 2000 dot-com bubble, the 2018 memory supercycle, and the 2021 COVID semiconductor boom, stock prices peaked about a year before earnings peaked. Applying this to the current cycle, even if the actual operating profit peaks around 2028, there is a possibility that stock prices will peak earlier, in the first half or mid-2027. Therefore, 2027 could be a period when corporate earnings are at their best, and at the same time, investor expectations reach their peak.

The KOSPI is also being discussed as potentially challenging the 10,000 level if the strength of AI semiconductors continues. Especially considering the market capitalization proportion of Samsung Electronics and SK Hynix, further increases in these two companies are directly linked to an increase in the index.

2028: Not the End of Growth, but a Change in How We Grow

However, 2028 could see a shift in atmosphere. This is because market attention will move from demand to supply. The biggest characteristic of the semiconductor industry is that supply does not increase continuously. While demand steadily grows, supply increases in a stepwise fashion, coinciding with the completion of factories. Both Samsung Electronics and SK Hynix are pursuing large-scale production capacity expansion.

Once advanced production facilities under construction in the US and Korea begin full operation, the market will start to evaluate the potential for increased supply for the first time. The phenomenon that emerges at this point is the downward revision of earnings estimates. Even if actual oversupply does not occur, the stock price will adjust first based solely on "concerns about oversupply." This is because semiconductor stocks front-load future expectations. The biggest risk in 2028 is not merely an increase in supply, but the moment when the rate of supply increase exceeds the rate of demand increase.

If the pace of AI infrastructure investment slows down and capacity expansion proceeds faster than expected, the market will begin to reflect the possibility of price declines, similar to past memory market conditions. Of course, this does not immediately imply a recession. Rather, 2028 is closer to a turning point, moving from a period of hyper-growth to stable growth. While the growth rate may decrease, the market size itself is likely to continue to expand.

The Variable of China

China is often an overlooked factor in existing forecasts. Currently, China is pursuing AI semiconductor self-sufficiency as a national strategy. Although still significantly behind Samsung Electronics and SK Hynix in the memory sector, it is accelerating its catch-up efforts based on massive government support and its domestic market. In particular, if Chinese companies like CXMT seriously enter the DDR5 and HBM markets, there is a possibility that supply competition will intensify in the mid-to-long term. However, by 2027-2028, the technological gap is still substantial, and Korean companies are likely to maintain their dominance.

Real Opportunities for Materials, Parts, and Equipment Companies

In this AI cycle, the materials, parts, and equipment (소부장) sector has been relatively overlooked. While Samsung Electronics and SK Hynix stock prices have risen significantly, many materials, parts, and equipment companies have not shown as strong a performance as expected. This is because the market is currently focusing on large memory companies that directly benefit from HBM production rather than equipment orders. However, after 2027, when expansion fully kicks in, the situation could change. During the construction of new factories and the expansion of production capacity, orders for semiconductor equipment, packaging, inspection equipment, and material companies are highly likely to increase significantly. In other words, while Samsung Electronics and SK Hynix were the primary beneficiaries of the AI supercycle, materials, parts, and equipment companies could be the secondary beneficiaries.

Geopolitics and Macroeconomic Variables

When looking towards 2028, a risk factor that investors can easily overlook is geopolitical variables. A surge in oil prices due to an escalation of the Middle East conflict, changes in trade policy after the US presidential election, the US-China technology hegemony competition, and a resurgence of global inflation can affect the market regardless of the semiconductor industry's conditions. In particular, AI infrastructure investment is sensitive to the interest rate environment. If long-term US interest rates rise again, the possibility of valuation pressure on growth stocks cannot be ruled out.

The Meaning of KOSPI 10000

BofA and Goldman Sachs' high valuation of the Korean market is not solely due to semiconductor performance. It's because factors that have historically discounted the Korean stock market are easing, with corporate value enhancement policies, increased dividends, share buybacks, and improved corporate governance all progressing simultaneously. Just as the Japanese stock market created a long-term bull market over the past decade through value-up policies, there is a possibility that Korea too will enter a phase of structural revaluation. Therefore, KOSPI 10000 is not just a number.

It is an indicator symbolizing that the Korean semiconductor industry has established itself as a key infrastructure provider in the AI era, and at the same time, it signifies that the Korean capital market has begun to receive valuations comparable to advanced markets. Ultimately, 2027 is likely to be the year when the AI semiconductor supercycle peaks. In contrast, 2028 is likely to be a turning point where the mode of growth changes, rather than the end of growth. If AI demand continues to expand, the Korean semiconductor industry can still remain at the center of the global market. However, investors should not forget the market's nature: increased supply, China's pursuit, macroeconomic variables, and that stock prices move ahead of earnings. The future success of the Korean semiconductor industry will depend not on simple production volume competition, but on how long it can maintain a super-gap in HBM, advanced packaging, and AI memory technology. If 2027 is the peak year, 2028 will be the first year to test how high that peak can be sustained.