Seoul: South Korean companies, particularly those involved in the global artificial intelligence (AI) supply chain such as semiconductor manufacturers, are expected to experience continued demand for their stocks in the coming year, according to a global market strategist. Kerry Craig, a managing director at JP Morgan Asset Management, expressed confidence during an interview with Yonhap News Agency, dismissing fears of an AI bubble in the stock market.
According to Yonhap News Agency, Craig explained that the current situation differs from the dot-com bubble because most funding is derived from companies' cash reserves rather than debt, and this is supported by real demand and a positive earnings outlook. Craig, who provides insights on global economic and financial trends for JP Morgan, emphasized that the concerns about capital expenditure spending levels do not indicate a bubble.
His remarks come amid broader concerns about an AI bubble in the U.S., where investors worry about tech firms' increasing reliance on debt to finance AI infrastructure projects. For instance, Oracle Corp. recently saw its shares fall after reporting lower-than-expected quarterly revenues, following its $18 billion debt raise in September for AI data center investments.
Craig noted the historical context of technology adoption, comparing the current AI investments to the internet and fiber expansion, which eventually saw absorption. He anticipates the U.S. AI market rally to persist, albeit at a slower pace than this year's surge.
In terms of the South Korean market, Craig projected supportive conditions for the next year, highlighting the country's pivotal role in the AI supply chain as a producer of memory chips and semiconductors. South Korea's KOSPI index outperformed other G20 nations' stock indices this year, with substantial gains led by chipmakers Samsung Electronics and SK hynix.
Craig does not perceive the Korean market as excessively overvalued, suggesting that factors like a weaker U.S. dollar and South Korea's diverse tech industry could further bolster the KOSPI index. He also predicted stabilization of the won-dollar exchange rate around 1,400 won per U.S. dollar, driven by currency hedging and narrowing interest rate gaps between South Korea and the U.S.
Additionally, Craig addressed the impact of U.S. tariffs, expecting them to act as a drag on global economic growth rather than trigger a recession. He highlighted the importance of company strategies to offset tariffs and the potential implications of the U.S. Supreme Court's decision on tariff legality.