(Seoul=NSP NEWS) = The KOSPI market has continued a steep correction phase this month. The KOSPI index, which hovered around the 8,800 level on the 1st, fell to the 7,600 level during trading on the same day, triggering a Level 1 circuit breaker(CB) and showing a sharp decline. However, the securities industry interprets the recent downturn as a short-term correction phase rather than a deterioration of the artificial intelligence(AI) investment cycle.

When asked about this, stock market experts unanimously stated, “The current downturn is a process of relieving the burden of high valuations centered on artificial intelligence(AI) and semiconductor sectors,” adding, “While there may be short-term fluctuations in the future, the earnings outlook for related companies remains solid.”

Key factors behind the correction in the domestic stock market this month include conservative AI guidance from U.S. semiconductor company Broadcom, receding expectations for a Federal Reserve(Fed) interest rate cut following strong U.S. employment figures, rising U.S. Treasury yields, and increased demand for cash ahead of SpaceX's IPO.

However, the market is noting that this decline is not a result of slowing corporate earnings or weakening industry growth. This is because the mid-to-long-term outlook surrounding increased AI investment and semiconductor demand remains intact.

Lee Sang-yeon, an equity strategy analyst at Shinyoung Securities, stated, “The recent decline is a natural price correction resulting from rapidly rising market expectations rather than the emergence of new negative factors.” He added, “While short-term volatility may increase depending on the U.S. Consumer Price Index(CPI) and the Federal Open Market Committee (FOMC) meeting, the trend of expanding AI infrastructure investment and the earnings outlook for related companies remain robust.”

Kim Hyo-jin, a global strategy analyst at Shinyoung Securities, also analyzed in a report on the same day, “Exports in most countries excluding Europe continue to grow at a double-digit rate, and hyperscalers leading AI investment execute investments primarily using equity capital, so their sensitivity to interest rates is relatively low,” adding, “Oil prices have also fallen back to the $90 per barrel level, so the environment is not one that will stimulate inflationary pressure for a long period.”

Kang Jin-hyuk, a senior researcher at Shinhan Investment & Securities, also stated in a report on the same day, “Although a circuit breaker was triggered as the KOSPI index fell below 7,500 points, the KOSPI’s 12-month forward P/E ratio is recording 7.83 times,” adding, “The current downtrend is closer to a multiple re-rating than to earnings impairment.”

The domestic stock market experienced a panic rally immediately after opening on this day. The KOSPI fell by more than 8% in the early trading session, triggering a circuit breaker, and subsequently, sell sidecars were activated in succession in the KOSDAQ and KOSPI markets.

However, the market also showed signs of partially recovering from intraday losses. As of 11:40 a.m., the KOSPI index rose to 7,805.94 points due to an inflow of buying from individual and institutional investors.

Market attention is now shifting from the cause of the correction to whether a recovery will occur. With increased investment in AI infrastructure and earnings outlooks for related companies remaining stable, the market is focusing on future U.S. inflation indicators and the direction of monetary policy to determine whether this decline will lead to a trend reversal or remain a short-term shock.