Goldman Sachs warns that the AI wave could lead to a K-shaped split in the economies of Taiwan and South Korea, as pressure from interest-rate hikes looms.

The chip export boom driven by the AI wave is profoundly reshaping Taiwan and South Korea’s economic structures. In its latest report, Goldman Sachs said that while the explosive growth in AI-related exports has pushed both countries’ trade surpluses to new highs, it has also intensified the “K-shaped divergence” between the technology sector and the non-technology sector. Goldman Sachs expects that the two countries’ central banks will face noticeable rate-hike pressure this year.

AI export boom lifts trade surplus, rate-hike pressure follows

Bloomberg reported that in a report released on the 11th, a research team led by Goldman Sachs Asia-Pacific economist Andrew Tilton said that the share of AI-related exports in South Korea’s GDP is expected to surge from the current level to nearly 30% this year, while Taiwan is expected to surpass 30%, with both countries rewriting historical records. Meanwhile, non-tech exports are dragging due to regional excess supply and energy shocks, creating a stark contrast.

On rate-hike timing forecasts, Goldman Sachs expects the Bank of Korea to raise rates by 1 quarter point (25 basis points) each in the third and fourth quarters, while Taiwan could raise by half a quarter point (12.5 basis points) in both the second and fourth quarters. Analysts noted that the continued expansion of the external trade surplus implies upward pressure on the currencies of the two countries, further strengthening the need for central banks to tighten monetary policy.

Current account surplus hits record highs, currency appreciation pressure emerges for Taiwan and South Korea

Goldman Sachs predicts that the technology export wave will drive the two countries’ current account surpluses to break historical highs within 2026, with South Korea exceeding 10% of GDP and Taiwan more likely to approach or even surpass 20% of GDP. The report said that currently, surplus funds in South Korea mainly flow into overseas stock markets, while Taiwan shifts more into foreign exchange deposits; but as the surplus continues to expand, appreciation pressure on the New Taiwan dollar and the Korean won is quietly building.

In terms of economic growth and outlook, Goldman Sachs expects South Korea’s GDP growth rate to rebound sharply from 1% in 2025 to 2.5% this year. Taiwan, meanwhile, could rise from last year’s 8.7% to 10%, the fastest growth pace since 1987.

Chetan Ahya, an Asia economist at Morgan Stanley, also pointed out in a recent report that Asia is entering an industrial super-cycle driven by AI infrastructure construction, providing external support for this optimistic outlook.

Tech sector dominance creates K-shaped economic crisis; policy response is the biggest test

Despite strong overall economic data, the hidden risks of a “K-shaped recovery” are becoming the biggest headache for Taiwan and South Korea’s policymakers. Goldman Sachs’ report pointed out that the AI-driven export boom is highly concentrated in the technology and semiconductor industries, benefiting a limited group, while workers in broad non-tech sectors and traditional industries are still struggling in low-growth slumps—two economies moving at markedly different speeds are operating in the same country in parallel:

The reality of a K-shaped cycle means governments need to respond with targeted and prudent fiscal policies.

How to support weaker industries and workers without suppressing the momentum of technology exports is also a policy challenge that Taiwan and South Korea governments cannot avoid in this AI wave.

(Rich get richer, and the poor have nowhere to go? The U.S. falls into a K-shaped economic model)

Goldman lifts its South Korean stock target; KOSPI seen as high as 9,000 points in a year

Benefiting from strong incentives tied to AI themes, Goldman Sachs still raised its 12-month target price for South Korea’s KOSPI index from 8,000 to 9,000 in the report, emphasizing that the performance of the Korean stock market is its “most confident” in Asia. Notably, this increase came only 20 days after the last adjustment, highlighting how quickly market sentiment is warming.

So far this year, KOSPI has gained more than 75% in total; the month-on-month rise this month reached 14%, and recently it also hit a historical high of 7,531 points during intraday trading. Goldman Sachs estimates that corporate earnings in South Korea will grow by as much as 300% this year, far above Taiwan’s forecast increase of 45%. On the other hand, institutions such as Citigroup and NH Investment & Securities have also raised their South Korean stock targets one after another.

Goldman Sachs specifically noted that even amid a major memory chip cycle, the forward price-to-earnings ratio for Korean chip stocks is still staying in the low single-digit range, indicating that the market’s assessment of the sustainability of profits still leaves room for underestimation.

This article, “Goldman Sachs Warns the AI Wave Could Lead to K-shaped Divergence in the Taiwan-South Korea Economy; Rate-Hike Pressure Is Approaching,” first appeared on Lian News ABMedia.