May 2025 South Korean Stock Market Outlook and Promising Industries Analysis Report

 

1. Executive Summary

The global and South Korean market environment in May 2025 is expected to show complex dynamics. Macroeconomic uncertainties persist, including the possibility of a delay in the US Federal Reserve's (Fed) interest rate cuts, ongoing inflationary pressures, and intensifying US-China trade conflicts. Domestically, the South Korean economy may experience some contraction due to the Q1 GDP negative growth and sluggish consumer sentiment. The Bank of Korea (BoK) is also expected to maintain a cautious monetary policy stance, monitoring growth slowdown risks and deteriorating trade conditions.  

However, despite these macroeconomic challenges, clear growth opportunities are emerging in specific industrial sectors. Particularly, the proliferation of Artificial Intelligence (AI) technology , windfall gains for the defense and shipbuilding industries due to global geopolitical tensions , acceleration of the energy transition , and the strengthening competitiveness of Korean companies in specific technology fields are likely to act as momentum for stock price increases in related industries. This polarization was also confirmed in the Q1 corporate earnings announcements; AI-related technology companies and export-driven firms like defense and shipbuilding recorded favorable results, while domestic-focused or cyclically sensitive sectors showed relatively sluggish performance.  

The government is also pursuing policies to boost the economy and enhance industrial competitiveness, including an 18 trillion KRW fiscal injection, early budget execution, and strategic industry promotion, necessitating attention to sectors expected to benefit from these policies.  

In conclusion, the South Korean stock market in May 2025 is judged to favor a selective approach centered on industries and companies with specific growth drivers, rather than an overall market rise. Based on this analysis, this report selects 10 promising industries expected to see stock price increases in May and presents the outlook, investment strategy, and specific recommended stocks for each industry. The selected industries are as follows:

1. Semiconductors (Memory & AI-focused)
2. Shipbuilding
3. Defense Industry
4. AI & Cloud Services / Data Centers
5. Renewable Energy & Components
6. Biotechnology & Healthcare
7. Electric Vehicle (EV) Batteries & Materials (ESS focus)
8. Entertainment & Media (K-Content focused)
9. Machinery & Construction Equipment
10. Steel (Specialty/High-Value Added focused)

The investment strategy should maintain some defensive characteristics considering macroeconomic uncertainties, but focus on industries with clear growth stories and leading companies within those industries possessing technological advantages and robust financial structures.

2. Global Macroeconomic and Geopolitical Environment (May 2025)

2.1. Key International Economic Events and Indicators (May 2025)

The global financial markets in May 2025 are expected to exhibit volatility depending on the economic indicator releases of major countries and the monetary policy decisions of central banks. Particularly, inflation and growth-related indicators from the US and the Eurozone will play a crucial role in determining market direction.  

• United States: The April Non-Farm Payroll (NFP) and unemployment rate, to be released early May (5/2), will be the first major indicators gauging the labor market situation. Subsequently, the Federal Open Market Committee (FOMC) regular meeting scheduled for May 6-7 and the minutes to be released on May 28 will provide clues about the future interest rate path. Key inflation and consumption indicators such as the April Consumer Price Index (CPI, 5/13), Producer Price Index (PPI, 5/15), and Retail Sales (5/15) will be released consecutively in mid-May. At the end of the month, the Q1 GDP revised estimate (5/29) and the April Personal Consumption Expenditures (PCE) Price Index (5/30) will be released, enabling a comprehensive assessment of the economic situation and price pressures. In addition, ISM Manufacturing and Services PMI (5/1, 5/5, 5/22), weekly jobless claims, etc., will also be continuously released.  
• Eurozone: Starting with the final Manufacturing and Services PMI releases in early May (5/2, 5/6), Retail Sales (5/7), German ZEW Economic Sentiment Index (5/13), Q1 GDP preliminary estimate (5/15), Eurozone and individual country (Germany, France) PMI flash estimates (5/22), and German Ifo Business Climate Index (5/26) will be announced. The April Consumer Price Index (CPI) flash estimate will be released on May 2, with the final figure confirmed on May 19. These indicators are important for gauging the strength of the Eurozone economic recovery and the trend of inflation slowdown.  
• China: After the Labor Day holiday in early May (5/1-2), the April Caixin Manufacturing PMI (4/30) and related economic indicators will provide an opportunity to confirm China's economic recovery momentum. Amid intensifying US-China trade conflicts, China's economic indicators can affect global trade and commodity markets.  
• Japan: The Bank of Japan's (BOJ) interest rate decision (expected to remain unchanged) on May 1, the Q1 GDP preliminary estimate on May 15, and the April CPI release on May 22 are scheduled. Attention is focused on the persistence of the yen's weakness and the possibility of Japan escaping deflation.  
• Others: The Bank of England's (BoE) interest rate decision (5/8) and GDP release (5/15), OPEC meeting (5/28), etc., are also events that could affect global financial markets.  

The results of these indicator releases, especially if inflation and growth rates significantly exceed or fall short of expectations, could trigger changes in central bank policy expectations, amplifying volatility in stock, bond, and foreign exchange markets.

2.2. Central Bank Policies and Outlook

The monetary policy directions of major central banks will continue to be a core variable for global financial markets in May. Particularly important will be the market's interpretation of the policy stance and future path of the US Federal Reserve and the European Central Bank (ECB).

• US Federal Reserve (Fed): At the FOMC meeting on May 6-7, the benchmark interest rate is highly likely to be frozen at the current level of 4.25-4.50%. Synthesizing the March FOMC minutes and recent statements by Fed officials, the Fed is expected to maintain a cautious stance on rate cuts until it is confident that inflation is sustainably slowing towards the 2% target level. The March dot plot suggested at least one rate cut by the end of 2025 (median estimate 3.75-4.00%), but subsequent economic indicators showing robust growth and slower-than-expected inflation deceleration have led to a retreat in market expectations regarding the timing and magnitude of rate cuts. According to CME Group's FedWatch tool, the market sees the highest probability of the first rate cut occurring at the June FOMC meeting (6/17-18), but this probability has decreased compared to before. The FOMC minutes to be released on May 28 are noteworthy as they will contain discussions among members about how long the rate cut 'pause' stance will continue. The Fed will still try to strike a balance between its dual goals of inflation control and maximizing employment, and various economic indicators (CPI, PPI, employment, etc.) to be released in May will significantly influence future policy decisions.  
• European Central Bank (ECB): The ECB cut its benchmark interest rate by 25bp at its meeting on April 17, lowering the deposit facility rate to 2.25%. This was the third cut in 2025, following four cuts in 2024. While expressing confidence in the inflation slowdown trend, the ECB emphasized that future policy decisions will be data-dependent and decided meeting-by-meeting, rather than pre-committing to a specific path. Factors supporting the possibility of further rate cuts include the Eurozone's economic growth being sluggish compared to the US and increasing uncertainty due to heightened trade tensions. However, despite the slowdown in service price inflation, it still exceeds the target (2%), and some forecast that rate hikes might be necessary again after 2026 due to the expansion of fiscal stimulus measures. The ECB's next monetary policy meeting is scheduled for June 4-5, so there will be no policy change in May.  
• Global Impact: The potential maintenance of the Fed's hawkish stance and the ECB's easing moves could act as a dollar strengthening factor. This could lead to upward pressure on the KRW/USD exchange rate, affecting Korea's import prices and foreign capital flows. Furthermore, concerns about the prolongation of the Fed's tightening stance could dampen global risk asset appetite, potentially burdening the Korean stock market. Conversely, the ECB's easing policy could raise expectations for Eurozone economic stimulus, potentially benefiting some export stocks.

2.3. Geopolitical Risks and Trade Tensions

The global market in May 2025 is expected to be influenced by heightened geopolitical risks and trade tensions. Particularly, the strengthened protectionist stance of the US under the second Trump administration is creating significant uncertainty in the global trade environment.  

• US-China Trade Conflict: The Trump administration has imposed high tariffs of up to 145% on Chinese products and has eliminated previous exemptions for steel and aluminum, applying a 25% tariff across the board. There are also moves to strengthen de minimis threshold regulations to curb the inflow of low-cost goods from China. These measures are provoking strong opposition from China ("will fight to the end"), and trade negotiations between the two countries are deadlocked. China may retaliate with measures such as controlling rare earth exports or strengthening non-tariff barriers against US companies. This conflict is accelerating the reorganization of global supply chains ("friend-shoring") and forcing other countries to choose sides. This could directly impact export-dependent economies like Korea, while simultaneously creating opportunities for certain industries (shipbuilding, defense, etc.) as alternatives to China.  
• Other Conflicts and Risks: The war in Ukraine and conflicts in the Middle East are ongoing, acting as destabilizing factors for the global economy through energy price volatility, rising maritime transport costs, and increased insurance premiums. Particularly, heightened tensions at major maritime choke points threaten supply chain stability. In addition, various geopolitical and socio-economic risk factors are interacting complexly, increasing global market uncertainty. These include the strengthening of protectionism due to the spread of populist policies, immigration restrictions, pressure to relax environmental regulations, extreme weather events and food security issues due to climate change, increasing cross-border cyberattacks, and demographic changes (aging and youth population issues).  

2.4. Global Supply Chain Status

Global supply chains are exposed to multi-layered risks such as geopolitical instability, climate change, and technological threats, and companies are reorganizing their supply chain strategies in response.  

• Persistent Disrupting Factors: Geopolitical tensions like the US-China trade conflict directly disrupt supply chains through tariff imposition and export controls. Conflicts in regions like Ukraine and the Middle East affect energy supply and logistics routes. Natural disasters such as floods and droughts due to climate change cause direct damage to production facilities and transportation infrastructure; considering the significant flood damage in 2024, related risks are likely to persist in 2025. Factors hindering supply chain stability also include strikes by port and railway workers, competition for securing critical minerals (rare earths, etc.) and export controls, increasing cyberattacks targeting sub-suppliers within the supply chain, and strengthening regulations on forced labor issues.  
• Corporate Response Strategies: Companies that experienced supply chain vulnerabilities after the pandemic are trending towards reducing dependence on single supply sources (especially China) and diversifying their supply chains. This is manifesting as 'decoupling' or 'near-shoring' to reduce dependence on specific countries or regions, and 'friend-shoring' to relocate supply chains to politically stable allied countries. Efforts are also being made to increase supply chain transparency and reorganize into geographically shorter and simpler structures. Diversification of transportation methods, such as shifting from sea to air transport or utilizing Less than Container Load (LCL) instead of Full Container Load (FCL), is also being explored. Recently, there have been active attempts to enhance supply chain efficiency and resilience by introducing advanced technologies like Artificial Intelligence (AI) for supply chain forecasting, inventory management, and production optimization.  

Based on this analysis of the global macroeconomic and geopolitical environment, May 2025 is expected to exhibit the following characteristics: First, the US Fed's cautious interest rate policy stance could burden the global liquidity environment, and the possibility of a strong dollar could act as pressure for KRW depreciation and rising import prices. Second, intensifying US protectionism is a threat factor for the overall Korean economy, but it could provide windfall opportunities for specific industries such as shipbuilding, defense, and some battery materials. This suggests the possibility that certain industries may gain new advantages amidst changes in the global competitive environment. Third, persistent supply chain instability and corporate efforts to strengthen resilience will create a favorable environment for companies with stable supply chain management capabilities and technological advantages. Particularly, companies that have secured production bases within final consumer markets or allied countries like the US or Europe may be relatively advantageous.  

3. South Korean Market Environment (May 2025)

3.1. Recent Economic Performance and Key Indicators (Scheduled for May Release)

The South Korean economy in 2025 showed a somewhat sluggish start amidst domestic and external uncertainties. The real Gross Domestic Product (GDP) growth rate for the first quarter recorded -0.2% compared to the previous quarter, marking negative growth and falling short of market expectations. The Bank of Korea (BoK) hinted at the possibility of further lowering its 2025 annual growth forecast from the existing 1.5%, reflecting the Q1 performance slump and worsened external trade conditions. Major causes cited were the simultaneous slowdown in domestic demand and exports due to prolonged political uncertainty and US tariff policies.  

On the price front, stability is being observed. The March Consumer Price Index (CPI) inflation rate was 2.1% year-on-year, and the core CPI inflation rate, excluding volatile food and energy prices, was 1.9%, approaching the BoK's target level (2%). Attention is focused on whether this stability will continue in the April CPI indicator to be released on May 2. However, the short-term expected inflation rate slightly rose from 2.7% in March to 2.8% in April, showing that household expectations for price stability remain somewhat unstable.  

Consumer sentiment remains contracted. The April Consumer Confidence Index (CCSI) slightly increased to 93.8 from the previous month (93.4) but remained significantly below the baseline of 100, indicating that pessimistic views prevail. Although easing political uncertainty and expectations for economic stimulus were partially reflected, assessments of current economic conditions and living standards actually declined. This suggests that the recovery of domestic demand may proceed slowly.  

Industrial activity, based on February indicators, showed increases in mining and manufacturing production, service industry production, retail sales, facility investment, and construction completed compared to the previous month. Facility investment, in particular, surged by 18.7% month-on-month, sending a positive signal. However, this is partly due to base effects and investment expansion in specific industries (like semiconductors), and construction completed plummeted by 21.0% year-on-year, showing the severity of the construction slump. The recent trends in production, consumption, and investment can be more clearly identified through the March and April Industrial Activity Trends to be released on May 30.  

In May, other major economic indicators such as the Balance of Payments (5/9), Export/Import Price Index (5/16), and Household Credit (5/20) are scheduled for release. These indicators are key variables that will influence the financial market and investment sentiment in May.  

3.2. Bank of Korea (BoK) Monetary Policy

The Monetary Policy Board of the Bank of Korea decided to keep the benchmark interest rate unchanged at the current 2.75% per annum at its meeting on April 17. This was the second consecutive freeze decision following the 25bp cut in February 2025.  

The background for the rate freeze includes the judgment that despite stable price trends, the downside risks to the growth path have increased due to sluggish economic activity in the first quarter and the deterioration of global trade conditions. Particularly, it is interpreted that the Board judged it necessary to maintain the current interest rate level and observe changes in domestic and external conditions further, given the high uncertainty of external conditions such as changes in US tariff policies.  

At the upcoming Monetary Policy Board meeting on May 29, deliberations on the interest rate decision are expected to deepen. The announcement of negative Q1 GDP growth and the possibility of a downward adjustment in the growth forecast are factors supporting the need for a rate cut. Some institutions even forecast 2-3 additional rate cuts within the year.  

However, there are many variables. If the April CPI inflation rate announced in early May is higher than expected, or if the expected inflation rate rises again, a rate cut decision could become difficult. Also, if the US Fed maintains a hawkish stance at the May FOMC meeting, the BoK may find it burdensome to cut rates due to concerns about the widening Korea-US interest rate gap and intensifying KRW depreciation. Persistent trade conflicts and geopolitical risks are also factors demanding cautious policy management from the BoK.  

In conclusion, the decision of the May Monetary Policy Board meeting is likely to be made by comprehensively considering domestic price indicators announced in early May, the results of the May FOMC meeting and subsequent changes in the Fed's stance, KRW/USD exchange rate trends, and the development of US-China trade conflicts. While the market weighs the possibility of a freeze, the atmosphere leaves room for a cut if the economic downturn deepens.  

3.3. Government Economic Policies and Stimulus Measures

The government has established and is implementing economic policy directions for 2025 with the goal of managing the economy as stably as possible in response to increasing domestic and external uncertainties. The main policy directions consist of four pillars: (1) Supporting the recovery of people's livelihoods, (2) Managing external creditworthiness, (3) Responding to uncertainties in the international trade environment, and (4) Increasing industrial competitiveness.  

Specific policy measures include the following:

• Short-term Economic Stimulus: A total of 18 trillion KRW in available resources will be mobilized by expanding major fund project plans, increasing investments by public institutions, promoting private sector investments, and providing additional policy financing. Also, the fiscal execution rate for the first half of the year will be raised to a record-high 67%, and particularly, 85 trillion KRW allocated to key sectors related to people's livelihoods and the economy will be executed up to 70% by the first half to visualize policy effects early. Consumption and tourism revitalization measures, such as supporting 1 million accommodation vouchers for non-metropolitan areas, will also be pursued.  
• Real Estate and Construction Soft Landing Support: Public housing supply will be increased through expanded new construction and increased purchase of newly constructed rental units, and public and private construction costs will be adjusted reflecting market realities to resolve industry difficulties. Easing tax burdens, such as comprehensive real estate tax in regional areas, will also be reviewed.  
• Strengthening Support for Vulnerable Groups: Measures to alleviate living cost burdens, such as applying additional tariff quotas on several food items and introducing rent tax credits for married couples living apart, will be implemented, and policy financing for low-income households will be supplied at a record-high level of 11 trillion KRW. Expansion of the Youth Employment All-Care Platform and measures to improve retirement pension yields for middle-aged and older individuals will also be pursued.  
• Managing External Creditworthiness: The foreign exchange (FX) market will be stably managed through structural improvements in FX supply, and external trust will be enhanced by strengthening communication with the international community. Measures to attract foreign investment, such as allocating separate quotas for Opportunity Development Zones in non-metropolitan areas and significantly increasing incentives, are also included.  
• Strengthening Industrial Competitiveness: Support will be provided for responding to new demand and enhancing the value-added of traditional key manufacturing industries such as shipbuilding, steel, and petrochemicals, and an innovation strategy focusing on AI, biotechnology, and quantum technology as the three major game-changers will be established. Nurturing new service industries and supporting service exports will also be strengthened. Efforts to expand key infrastructure, including support for the power grid and attracting overseas talent, will continue. Investment revitalization measures, such as applying special accelerated depreciation for facility investment to small and medium-sized enterprises and supplying the largest-ever scale of facilities funds, have also been prepared.  

These government policies are expected to have a positive impact, particularly on companies related to strategically nurtured industrial fields such as AI, bio, semiconductors, data centers, cloud, shipbuilding, defense, and renewable energy.  

3.4. Summary of Q1 Corporate Earnings Season

The earnings of domestic companies in the first quarter of 2025 showed distinct contrasts across industries. This is interpreted as a reflection of the dual nature of the macroeconomic environment analyzed earlier, namely sluggish domestic demand and export booms in specific sectors.  

• Industries/Companies Recording Strong Performance:

  • Semiconductors (Memory): SK hynix recorded an operating profit of 7.4405 trillion KRW (operating margin 42%), exceeding market expectations, driven by the surge in demand for HBM (High Bandwidth Memory) due to the AI boom. This was the second-highest quarterly performance ever, proving its technological leadership and high profitability in the HBM market. Samsung Electronics also indicated a significant improvement compared to the same period last year by announcing a preliminary operating profit of 6.6 trillion KRW for Q1, but detailed performance by business division needs further confirmation.  
  • Shipbuilding: Hanwha Ocean achieved an earnings surprise with sales of 3.14 trillion KRW and operating profit of 258.6 billion KRW, surging 38% and 389% respectively year-on-year, thanks to strong sales of high-value-added LNG carriers. HD Hyundai Heavy Industries also achieved robust performance with a Q1 operating profit of 433.7 billion KRW, significantly exceeding market expectations.  
  • Defense Industry: Major defense companies like Hanwha Aerospace and Hyundai Rotem were projected to see their combined Q1 operating profit surge more than threefold year-on-year, driven by increased export volumes to Poland and other countries. Hanwha Aerospace, in particular, was expected to see its operating profit surge more than tenfold due to strong exports of K-9 self-propelled howitzers and Chunmoo multiple launch rocket systems.  
  • Bio (CDMO): Samsung Biologics continued its robust growth trend, recording consolidated sales of 1.3 trillion KRW and operating profit of 486.7 billion KRW in Q1, driven by the full operation of Plants 1-3, stable ramp-up of Plant 4, and favorable exchange rate effects.  
  • IT Services (Cloud/Logistics): SamsungSDS recorded Q1 sales of 3.4898 trillion KRW and operating profit of 268.5 billion KRW, increasing 7.5% and 18.9% year-on-year respectively, driven by the high growth of its cloud business (CSP and MSP, up 23% YoY) and the growth of its digital logistics platform 'Cello Square'.  
  • Automotive: Hyundai Motor achieved record Q1 sales and operating profit, with sales of 44.41 trillion KRW and operating profit of 3.63 trillion KRW, driven by strong hybrid vehicle sales and a favorable exchange rate environment.  

• Industries/Companies with Sluggish/Mixed Performance:

  • Batteries: Performance was sluggish due to the slowdown in EV demand ("chasm" phenomenon) and customer inventory adjustments. Samsung SDI recorded an operating loss of over 400 billion KRW despite reflecting 109.4 billion KRW in AMPC (Advanced Manufacturing Production Credit) under the US IRA (Inflation Reduction Act). LG Energy Solution recorded an operating profit of 374.7 billion KRW thanks to reflecting 457.7 billion KRW in AMPC, but showed an operating loss of 83 billion KRW excluding it. SK On is also expected to report a loss.  
  • Steel: POSCO Holdings showed improved performance compared to the previous quarter (operating profit 570 billion KRW), but recorded sluggish performance compared to the same period last year due to the continued slump in the steel market and difficulties in the battery materials segment.  
  • Entertainment: Major agencies showed a decline in operating profit despite external growth in their 2024 results, and Q1 results are likely to show mixed trends. HYBE, SM, and JYP announced their results.  
  • Construction Equipment: Doosan Bobcat saw its 2024 annual sales and operating profit decrease by 16% and 40% respectively year-on-year due to the construction market downturn, and Q1 performance was likely sluggish.  

Q1 earnings reaffirmed that AI-related demand is a core driver boosting performance and showed the increasing influence of US policies (tariff threats, IRA tax benefits). It also confirmed the structural growth potential of the shipbuilding and defense sectors, while revealing that some industries like EVs and steel are affected by short-term demand slowdowns or market slumps.  

3.5. Domestic Consumption and Investment Trends

• Consumer Sentiment: As mentioned earlier, the April Consumer Confidence Index (CCSI) was 93.8, still below the baseline of 100, indicating pessimistic consumer sentiment. While indices for future living standards and economic outlook slightly rose, reflecting some expectation for future government policy effects or economic recovery amidst current difficulties, indices for current living standards and economic assessment declined. However, with the burden of high prices and high interest rates persisting and no clear improvement in the job market, consumption recovery is expected to take time. The fact that February retail sales increased month-on-month but decreased year-on-year also supports the consumption slump. The effect of the government's consumption revitalization measures (accommodation vouchers, etc.) may be limited.  
• Investment Trends: Facility investment showed a large increase (18.7%) month-on-month in February, but this could be the result of large-scale investments in specific industries like semiconductors being reflected, and it's difficult to see it as an overall improvement in investment sentiment. Construction investment slightly increased (1.5%) month-on-month in February but plummeted by 21.0% year-on-year, clearly showing the persistence of the construction slump. The real estate market recovery is being delayed due to high interest rate burdens and economic uncertainty, despite government deregulation and supply expansion policies, with a preference for affordable housing and suburban areas emerging. Corporate investment plans tend to focus on new growth engine areas such as AI, semiconductors, batteries (especially ESS), and data centers. The government is promoting policies to revitalize investment, such as strengthening support for SME facility investment, but overall economic uncertainty and high financing costs could act as constraints on investment expansion. Data center investment is expected to show exceptionally strong growth driven by AI proliferation and accelerating cloud transition.  

Overall, the South Korean economy faces difficulties on the domestic front, including negative Q1 growth and sluggish consumer sentiment. However, certain export-driven industries like AI, defense, and shipbuilding are showing robust growth driven by global demand, revealing a dual aspect of the economy. While government stimulus measures are being pursued, their short-term effects may be limited, and the Bank of Korea is expected to conduct cautious monetary policy balancing economic stimulus with price and exchange rate stability. Notably, the US IRA tax credits are having the effect of improving the superficial performance of battery companies, so careful analysis of actual business performance excluding these policy effects is necessary when making investment decisions.  

4. Top 10 Promising Industries for Stock Price Increase in May 2025

Based on the comprehensive analysis of the global and domestic market environments above, we select 10 South Korean industrial sectors with high potential for stock price increases in May 2025 and present the outlook and recommended stocks for each industry.

4.1. Semiconductors (Memory & AI-focused)

• Industry Outlook & Investment Rationale:

  • Global Context: The global semiconductor market in 2025 is projected to continue its strong growth trajectory, driven by the explosive increase in demand for AI (Artificial Intelligence) chips. Demand for data center GPUs, HBM (High Bandwidth Memory), and high-performance logic chips is particularly leading the market. The memory semiconductor (DRAM, NAND) market has also entered a recovery cycle, supported by increasing AI server demand and inventory level normalization. Major market research firms like WSTS, Gartner, and IDC predict double-digit growth of 11-15% for the global semiconductor market in 2025. However, it should be noted that growth in some mature markets like PCs, smartphones, and automotive may be relatively slow.  
  • Domestic Situation: South Korea leads the global memory semiconductor market, spearheaded by Samsung Electronics and SK hynix. SK hynix, in particular, recorded an earnings surprise in Q1 2025 based on its technological superiority in the HBM market, demonstrating superior profitability compared to competitors. This exemplifies the competitiveness of Korean companies as key players in the AI-era memory semiconductor market. The government has also designated the semiconductor industry as a national strategic industry and is actively implementing support policies. Companies are continuing investments to expand advanced process and HBM production capacity. The expectation that the strong earnings momentum from Q1 will continue into Q2 is likely to positively impact stock prices in May.  
  • US Comparison: The US semiconductor industry (tracking the SOX index) is also benefiting from AI, but differs in that it is directly affected by the US-China technology hegemony competition and tariff policies. US companies primarily show strengths in fabless (design) and equipment fields, whereas Korea holds an overwhelming position in memory manufacturing. The SOX index has recently shown an upward trend but the possibility of short-term technical adjustments is also raised. In the long term, AI is expected to drive growth, and US government policies like the CHIPS Act and tariffs are influencing the global market structure.  
  • May Catalysts: News related to the continuous spread of AI adoption, Q2 earnings expectations based on strong Q1 results and potential target price upgrades by securities firms, and positive signals regarding easing inventory burdens could act as stock price appreciation momentum. Geopolitical risks still exist, but currently, the powerful growth narrative of AI demand dominates the market.  
  • In-depth Analysis: Currently, SK hynix leads the HBM market and is likely to achieve excess performance compared to Samsung Electronics and the market in the short term. This stems from the HBM technology gap and securing key customers (like NVIDIA). However, variables to watch in the long term include Samsung Electronics' HBM technology catch-up and the potential emergence of cheaper AI models reducing dependence on cutting-edge HBM. That is, the performance of the semiconductor sector will be closely linked to the AI infrastructure investment cycle. Against this backdrop, AI requires massive memory bandwidth, especially HBM, and SK hynix currently leads the market by supplying cutting-edge HBM (HBM3E) to key customers like NVIDIA. This led to outstanding Q1 performance and market share gains, and the expectation that this trend will continue into Q2 will positively influence investment sentiment in May. Samsung Electronics' HBM certification delay further solidifies SK hynix's short-term advantage. While long-term competition and technological change risks exist, the May market is likely to focus on the ongoing HBM demand cycle and its leader, SK hynix.  

• Key Evidence Summary (Table):

  Table 1: Semiconductor Industry (Memory & AI-focused) Investment Rationale Summary - May 2025

Factor	Related Data/Indicators	Source Snippet ID(s)	May Outlook & Implications
AI Demand Surge	High growth forecast for AI chips (GPU, HBM), Data centers as main growth driver		Continued strong demand expected, benefiting memory suppliers.
Memory Market Recovery	Inventory normalization, Double-digit growth forecast for memory segment		Positive market cycle transition, supporting price and volume improvements.
SK hynix HBM Leadership	Record Q1 profit, Q2 HBM3E revenue share target >50%, Q1 HBM market share 70%		Strong momentum expected to continue in Q2, positive for May stock price.
Industry Growth Outlook	WSTS, Gartner, IDC predict 11-15% global semiconductor growth in 2025		Positive industry backdrop supports sector investment sentiment.
Geopolitical Factors	US tariff risks, Onshoring trend		Uncertainty persists, but AI demand currently outweighs tariff impact (for leading firms).

 

• Top 5 Recommended Stocks:
  1. SK hynix (000660.KS):
     • Company Overview: Global leader in memory semiconductors like DRAM and NAND. Currently leads the HBM market, essential for AI applications.
     • Recent Performance/Financials: Recorded Q1 2025 earnings significantly exceeding market expectations (Revenue KRW 17.6T, Operating Profit KRW 7.4T, Operating Margin 42%). Holds KRW 14.3T in cash equivalents, excellent financial health with net debt ratio of 11%.  
     • Growth Outlook/Catalysts (May Focus): Full-scale shipment of 12-layer HBM3E in Q2 (HBM3E revenue share target >50%) , continued strong demand from AI customers (NVIDIA, etc.), expected effect from launching new AI-specific products (LPCAMM2, SOCAMM2) , potential target price upgrades by securities firms based on Q1 strong performance, benefit from memory market upcycle.  
     • Recommendation Rationale: Clear leader in the highest growth area of AI-oriented HBM. Proven outstanding execution and profitability (high Q1 margin). High demand visibility secured based on long-term HBM supply contracts. Superiority over competitor (Samsung Electronics) in the key HBM field. Expected to benefit most from AI-based memory growth in the short term.  
     • Related Snippets:.  
  2. Samsung Electronics (005930.KS):
     • Company Overview: Global comprehensive semiconductor company (Memory, Foundry, System LSI) and IT device manufacturer. No. 1 market share in memory.
     • Recent Performance/Financials: Showed significant earnings improvement with preliminary Q1 operating profit of KRW 6.6T. Memory division turnaround analyzed as the main factor. Possesses a robust financial structure.  
     • Growth Outlook/Catalysts (May Focus): Continued earnings improvement expectation due to full-scale memory market recovery. Laggard in the HBM market but efforts in technology development and customer acquisition are ongoing. Expectation for AI chip orders in the foundry business. New product effect in the mobile division, including Galaxy S series.
     • Recommendation Rationale: Direct beneficiary of memory market recovery. Expectation for additional growth momentum if HBM market competitiveness recovers. Diversified business portfolio including foundry and mobile. Maintains market dominance as an industry leader.
     • Related Snippets:.  
  3. Hanmi Semiconductor (042700.KS):
     • Company Overview: Global leader in TC Bonder equipment, essential for HBM production. Secures major customers like SK hynix.
     • Recent Performance/Financials: Rapid earnings growth since 2024 due to direct benefit from HBM investment expansion cycle. Q1 performance also estimated to be favorable (Specific Snippet absent, based on external info).
     • Growth Outlook/Catalysts (May Focus): Expectation for increased equipment orders following HBM production capacity expansion by major customers like SK hynix. Potential for new equipment demand due to HBM technology advancement (HBM3E, HBM4). Continued trend of AI semiconductor investment expansion.  
     • Recommendation Rationale: One of the key beneficiaries of HBM market growth. Possesses unique technology and market share. Close relationship with major customers. Plays a core role within the AI semiconductor supply chain.
     • Related Snippets: , (Hanmi Semiconductor-SK hynix conflict mentioned, investment caution needed).  
  4. ISC (095340.KQ):
     • Company Overview: Semiconductor test socket specialist. Competitive in high-performance semiconductor test sockets, especially for AI semiconductors, server CPUs/GPUs.
     • Recent Performance/Financials: Earnings improvement expected as related test socket demand increases with AI semiconductor market growth. (Specific Snippet absent, based on external info).
     • Growth Outlook/Catalysts (May Focus): Concurrent rise in test socket demand with increasing AI semiconductor shipments. Socket replacement demand due to the spread of next-gen memory like DDR5. Customer diversification and new product development.
     • Recommendation Rationale: Beneficiary of AI semiconductor ecosystem expansion. High growth potential in the high-performance semiconductor test socket market. Secured technological competitiveness and customer base.
     • Related Snippets:.  
  5. Lino Industrial (058470.KQ):
     • Company Overview: Specialist manufacturer of IC sockets and probe pins for semiconductor testing. Competitive in high-value-added products based on fine pitch technology.
     • Recent Performance/Financials: Maintains stable earnings growth trend. High profitability (operating margin) is a strength. (Specific Snippet absent, based on external info).
     • Growth Outlook/Catalysts (May Focus): Expansion of test demand due to increasing demand for high-performance semiconductors like AI, 5G, autonomous driving. Increased demand for high-precision test components due to advancements in micro-processing. Increased test demand due to performance improvements in IT devices.
     • Recommendation Rationale: Technology leader in the semiconductor test component market. High technological entry barrier and profitability. Expectation for stable growth based on demand from various front-end industries (mobile, server, automotive, etc.).
     • Related Snippets:.  

4.2. Shipbuilding

• Industry Outlook & Investment Rationale:

  • Global Context: Global new shipbuilding orders in 2025 could decrease by about 30% compared to the 2024 peak, according to Clarkson Research. This is analyzed as a result of intensifying geopolitical uncertainty and weak shipping market conditions. However, amidst this overall slowdown forecast, the Korean shipbuilding industry faces differentiated opportunities. Demand for eco-friendly ships (LNG-powered, ammonia-powered, etc.) and high-value-added ships (LNG carriers, ultra-large container ships, etc.) is steadily increasing, driven by stricter regulations and the energy transition trend. Particularly, the intensifying trade conflict between the US and China is bringing unexpected windfall gains to the Korean shipbuilding industry. As the US strengthens regulations on Chinese-built ships, such as imposing port usage fees, global shipping companies are showing movements to change their order placements from China to Korea. In fact, in March and April 2025, Korean shipbuilders consecutively signed large-scale container ship order contracts. Furthermore, due to the shortage of US Navy vessel maintenance, repair, and overhaul (MRO) capacity and limitations in domestic production capabilities, the possibility of entrusting MRO business to Korean shipyards or even collaborating on new vessel construction is being raised.  
  • Domestic Situation: Korean shipbuilders possess world-class technological competitiveness in high-value-added ship sectors like LNG carriers. In the Q1 earnings announcement, Hanwha Ocean and HD Hyundai Heavy Industries recorded strong performance exceeding market expectations, confirming the trend of profitability improvement. Stable earnings growth is expected based on a solid order backlog, and the government is also promoting financial support expansion for the shipbuilding industry.  
  • US Comparison: The US shipbuilding industry is struggling due to high costs, labor shortages, and aging production facilities, with particularly limited commercial shipbuilding capacity. This increases the need for cooperation with allies like Korea for US Navy vessel MRO and construction. US shipbuilding industry policy focuses on reviving the domestic industry, but cooperation with allies is inevitable in the short term. US tariff policies add uncertainty to the global shipping and shipbuilding markets.  
  • May Catalysts: Specific progress news related to US Navy MRO contracts, additional orders for high-value-added ships like LNG carriers, continued positive investment sentiment after Q1 strong earnings announcements, and news related to eco-friendly ship technology development could act as positive momentum.  
  • In-depth Analysis: The clear discrepancy between the potential slowdown of the overall global new shipbuilding market and the recent order boom in the Korean shipbuilding industry highlights the differentiated competitive advantage of Korean shipyards. Korean shipbuilders are (1) focusing on high-value-added markets with high technological barriers, such as LNG carriers and eco-friendly ships , (2) absorbing orders from shipowners avoiding China due to US-China conflict , and (3) securing a new growth engine by entering the US MRO market. Therefore, even if the overall global market slows down, the Korean shipbuilding industry is likely to maintain relatively robust performance or even expand its market share. This is a factor increasing the investment attractiveness of Korean shipbuilding stocks.  

• Key Evidence Summary (Table):

  Table 2: Shipbuilding Industry Investment Rationale Summary - May 2025

Factor	Related Data/Indicators	Source Snippet ID(s)	May Outlook & Implications
High-Value Ship Demand	Increased demand for LNG carriers, eco-friendly ships (ammonia, etc.), technological competitive edge		Core competitive area for Korean shipyards, providing a stable order base.
US-China Trade Conflict Windfall	Increased container ship orders for Korean shipyards due to US policies checking China (port fees, etc.)		Geopolitical factors working favorably for Korean shipbuilding, strengthening short-term order momentum.
US Navy MRO Opportunity	US pushing to outsource MRO to allies like Korea due to domestic shipyard capacity shortage, MSRA certification in progress		Potential to secure new growth engine, related news flow expected.
Q1 Earnings Strength	Major shipbuilders like Hanwha Ocean, HD Hyundai Heavy Industries reported Q1 earnings surprise		Profitability improvement trend confirmed, positive investment sentiment likely to continue.
Global Order Slowdown Concern	Clarkson Research forecasts ~30% decline in global newbuild orders in 2025		Potential for overall market contraction exists. However, Korea may differentiate due to high-value/geopolitical factors.
Government Support	Government's industry support commitment, including expanded Export-Import Bank financing		Policy support contributes to industry stability and competitiveness enhancement.

 

• Top 5 Recommended Stocks:
  1. HD Korea Shipbuilding & Offshore Engineering (009540.KS):
     • Company Overview: Intermediate holding company for HD Hyundai Group's shipbuilding division. Holds subsidiaries like HD Hyundai Heavy Industries, HD Hyundai Mipo, HD Hyundai Samho.
     • Recent Performance/Financials: Consolidated earnings improving driven by subsidiaries' strong performance. Subsidiary HD Hyundai Heavy Industries reported Q1 earnings surprise. Recently signed large-scale container ship order contracts.  
     • Growth Outlook/Catalysts (May Focus): Expectation for continued robust order backlog and earnings improvement trend of subsidiaries. Leading the market in high-value-added ships like LNG carriers and eco-friendly vessels. Beneficiary of US-China conflict windfall. Pursuing entry into the US MRO market.  
     • Recommendation Rationale: Holds market dominance as the holding company of Korea's No. 1 shipbuilding group. Diversified portfolio (various ship types and subsidiaries). Competitiveness in high-value-added ships and eco-friendly technology. Geopolitical benefits and MRO new business expectations.
     • Related Snippets:.  
  2. Hanwha Ocean (042660.KS):
     • Company Overview: Formerly Daewoo Shipbuilding & Marine Engineering. Pursuing resurgence after acquisition by Hanwha Group. Strengths in commercial ships (especially LNG carriers) and special vessels (submarines, etc.).
     • Recent Performance/Financials: Recorded Q1 2025 earnings surprise (Revenue KRW 3.14T, Operating Profit KRW 258.6B). Rapid earnings growth in the commercial ship division centered on LNG carriers. Financial structure improvement in progress.  
     • Growth Outlook/Catalysts (May Focus): Benefit from continued boom in the LNG carrier market. Stable earnings contribution from the special vessel division (submarines, etc.). Actively pursuing entry into the US MRO market (MSRA certification in progress). Expectation for synergy within Hanwha Group (defense, etc.). Announced large-scale facility investment plan (floating dock, offshore crane, etc.).  
     • Recommendation Rationale: Strong player in the LNG carrier market. Competitiveness in the special vessel field. High growth potential in the MRO new business. Turnaround visualized through Q1 results. Expectation for group-level support and investment expansion.  
     • Related Snippets:.  
  3. Samsung Heavy Industries (010140.KS):
     • Company Overview: Samsung Group affiliate shipbuilder. Business structure centered on high-value-added ships like offshore plants and LNG carriers.
     • Recent Performance/Financials: Succeeded in turning profitable in 2024. Q1 results not yet announced, but earnings improvement trend expected to continue based on order backlog. Recently signed container ship order contract.  
     • Growth Outlook/Catalysts (May Focus): Expectation for benefit if the offshore plant market, including FLNG (Floating Liquefied Natural Gas production facility), recovers. Continued orders for LNG carriers and eco-friendly ships. Development of next-gen eco-friendly fuel technologies like ammonia.
     • Recommendation Rationale: Holds strengths in the offshore plant field. Competitiveness in high-value-added ships like LNG carriers. Leading eco-friendly technology development. Expectation for stabilization after earnings turnaround.
     • Related Snippets:.  
  4. HD Hyundai Heavy Industries (329180.KS):
     • Company Overview: Core subsidiary of HD Korea Shipbuilding & Offshore Engineering. Possesses capability to build various commercial and special vessels. Also operates an engine machinery division.
     • Recent Performance/Financials: Recorded Q1 2025 earnings surprise (Operating Profit KRW 433.7B). Revenue also exceeded market expectations.  
     • Growth Outlook/Catalysts (May Focus): Stable earnings growth based on abundant order backlog secured through the parent company. Market boom in main ship types like LNG carriers and container ships. Pursuing entry into the US MRO market. Earnings contribution from the engine division.  
     • Recommendation Rationale: Core production base of HD Hyundai Group's shipbuilding division. Experience and technology in building various ship types. Strong turnaround momentum confirmed through Q1 results. Opportunities in new businesses like MRO.  
     • Related Snippets:.  
  5. HD Hyundai Mipo (010620.KS):
     • Company Overview: Subsidiary of HD Korea Shipbuilding & Offshore Engineering. World No. 1 in medium-sized petrochemical product carriers (PC carriers) and container ships.
     • Recent Performance/Financials: Recently signed large-scale order contracts for small and medium-sized container ships (feeder ships). No. 1 market share in the feeder container ship market. (Q1 earnings Snippet absent).  
     • Growth Outlook/Catalysts (May Focus): Expectation for recovery in the PC carrier market, its main ship type. Benefit from increased orders for small and medium-sized container ships due to US-China conflict. Expansion of application of eco-friendly ship technologies (methanol, ammonia, etc.).  
     • Recommendation Rationale: Global powerhouse in the medium PC carrier and feeder container ship markets. Secures stable orders based on market dominance in specific ship types. Potential for direct benefit from US-China conflict. Competitiveness in eco-friendly ship technology.  
     • Related Snippets:.  

4.3. Defense Industry

• Industry Outlook & Investment Rationale:

  • Global Context: A clear trend of global military buildup is evident due to the prolonged Russia-Ukraine war, instability in the Middle East, and intensifying US-China hegemony competition. Global military spending in 2024 surged 9.4% year-on-year to a record $2.718 trillion, with particularly notable spending increases in Europe and the Middle East. Defense spending increases by NATO member countries are expected to continue, and European countries are seeking to strengthen their own defense capabilities and diversify arms import sources amidst doubts about US security guarantees. This environment provides unprecedented opportunities for the Korean defense industry.  
  • Domestic Situation: The Korean defense industry is gaining attention in the global market based on excellent quality, price competitiveness, and fast delivery (QCD competitiveness). Particularly, large-scale arms export contracts with Poland (K2 tanks, K9 self-propelled howitzers, FA-50 light attack aircraft, etc.) have significantly elevated the status of Korean defense. In 2025, the second contract for Polish K2 tanks (180 units, $6.2 billion scale) is imminent, and negotiations for exporting 100 FA-50s to Egypt are reportedly in the final stages. Export discussions with various regions such as Vietnam, Europe, and the Middle East are also actively underway. Q1 performance of major defense companies is expected to show significant growth driven by this export boom. The government is also actively supporting defense exports and strengthening investments in future technologies like AI and unmanned systems.  
  • US Comparison: The US remains the world's largest defense spender, focusing investments on military modernization, AI, autonomous systems, and cyber security. Under the Trump administration, there is a possibility of changes in contracting methods (preference for fixed-price contracts, etc.) , and moves to supplement the limitations of the domestic industrial base through cooperation with allies are also observed. The US defense market is huge but has high entry barriers, so Korean companies are mainly targeting European, Middle Eastern, and Asian markets or seeking technology cooperation and MRO business participation with the US.  
  • May Catalysts: News of signing large-scale export contracts such as the Polish K2 tank 2nd contract or the Egyptian FA-50 contract, continued momentum following strong Q1 earnings announcements, increased interest in defense stocks due to ongoing geopolitical tensions, and the possibility of additional government defense support policy announcements could positively impact stock prices.  
  • In-depth Analysis: The Korean defense industry is currently experiencing a 'golden time'. This is because amidst macroeconomic environmental changes—intensifying global security anxiety, European countries' rearmament and demand for diversifying arms import sources, and increasing uncertainty about the US security umbrella—the 'cost-effectiveness' and 'speed' of Korean-made weapons are being highlighted. Particularly in the European market, it is expected to take 3-5 years just to reactivate domestic production lines, making it crucial for Korean defense companies to secure market share during this period. Securing order contracts now can establish a long-term revenue base through subsequent military logistics support, performance upgrades, and parts supply that will continue for decades. This implies the potential for structural growth of the Korean defense industry beyond a simple short-term boom.  

• Key Evidence Summary (Table):

  Table 3: Defense Industry Investment Rationale Summary - May 2025

Factor	Related Data/Indicators	Source Snippet ID(s)	May Outlook & Implications
Global Military Spending Surge	2024 world military spending up 9.4% (highest YoY increase), esp. Europe/Middle East surge (SIPRI)		Confirms structural increase trend in demand for defense products.
European Market Opportunity	European nations need to move away from US dependence & rapidly reinforce capabilities, Korean weapons' competitiveness highlighted		"Window of Opportunity" for Korean defense firms to expand European market share over next 3-5 years.
Large Export Deals Signed/Expected	Poland K2/K9/FA-50 deals execution & K2 2nd contract imminent, Egypt FA-50 100 units export negotiation final stage		Continuous order momentum translates to earnings growth and stock price appreciation expectations.
QCD Competitiveness	Excellent Quality, Cost-effectiveness, Delivery speed		Factor increasing the attractiveness of Korean defense products in the global market.
Q1 High Earnings Growth Forecast	Major 4 defense firms' combined operating profit expected to triple+ YoY (FnGuide)		Confirms export boom is leading to substantial earnings improvement.
Government Support & Tech Investment	Government defense export support policies, strengthening investment in future tech like AI/unmanned systems		Laying the foundation for sustainable industry growth.

 

• Top 5 Recommended Stocks:
  1. Hanwha Aerospace (012450.KS):
     • Company Overview: Core defense affiliate of Hanwha Group. Engaged in ground weapon systems like K9 self-propelled howitzer, Chunmoo multiple launch rocket system, Redback armored vehicle, as well as aircraft engines and space launch vehicle businesses.
     • Recent Performance/Financials: Explosive earnings growth trend, with Q1 operating profit expected to surge more than 10 times YoY. Holds robust order backlog based on large-scale export contracts with Poland, etc..  
     • Growth Outlook/Catalysts (May Focus): Acceleration of earnings growth due to full-scale delivery of Polish K9/Chunmoo export volumes. Expectation for additional exports to Romania, Australia, etc.. Efforts to pioneer new markets like the US (US factory investment plan). Growth potential in the aerospace sector.  
     • Recommendation Rationale: Global powerhouse in the ground defense field. Possesses bestseller weapon systems like the K9 howitzer. Success in targeting major markets like Europe and Australia, and expectation for additional orders. Group-level focus on nurturing the defense business.
     • Related Snippets:.  
  2. Hyundai Rotem (064350.KS):
     • Company Overview: Affiliate of Hyundai Motor Group. Engaged in ground weapon systems like K2 tanks, railway vehicles, and plant businesses.
     • Recent Performance/Financials: Q1 operating profit expected to surge more than 4 times YoY. Polish K2 tank exports driving earnings growth.  
     • Growth Outlook/Catalysts (May Focus): Polish K2 tank 2nd contract (180 units) imminent. Possibility of additional K2 tank exports to Norway, etc.. Earnings improvement in the railway division and promotion of new businesses like hydrogen mobility.  
     • Recommendation Rationale: Company with the strongest K2 tank export momentum. Expectation for large-scale earnings level-up if Polish 2nd contract is signed. Possibility of group-level support and technology cooperation.  
     • Related Snippets:.  
  3. Korea Aerospace Industries (KAI) (047810.KS):
     • Company Overview: South Korea's sole aircraft system integrator. Develops and produces FA-50 light attack aircraft, Surion utility helicopter, KF-21 fighter jet, etc. Also engaged in satellite business.
     • Recent Performance/Financials: Q1 operating profit expected to increase by 19.4~39.4% YoY. Currently executing FA-50 export contracts with Poland and Malaysia.  
     • Growth Outlook/Catalysts (May Focus): Final stage of negotiations for exporting 100 FA-50s to Egypt. Expectation for additional FA-50 exports to the Philippines, Middle East, etc.. Smooth progress in KF-21 development and expectation for mass production. Possibility of exporting Surion helicopters to Iraq. Expansion into future businesses like satellites and UAM (Urban Air Mobility).  
     • Recommendation Rationale: Secured successful overseas export references for the FA-50 light attack aircraft. Secures strong growth engine if large-scale Egyptian export contract is signed. Stable earnings base due to execution of national projects like KF-21.  
     • Related Snippets:.  
  4. LIG Nex1 (079550.KS):
     • Company Overview: LIG Group affiliate defense company. Specialist in advanced weapon systems such as precision guided weapons (Cheongung-II, etc.), surveillance reconnaissance (radar), command control communication, and avionics.
     • Recent Performance/Financials: Q1 operating profit expected to slightly decrease , but order backlog exceeded 20 trillion KRW at year-end (record high). Secured large-scale orders including the UAE Cheongung-II export contract.  
     • Growth Outlook/Catalysts (May Focus): Expectation for expansion of guided weapon exports like Cheongung-II (Saudi Arabia, etc.). Participation in domestic military modernization projects. Entry into new business areas like drones and satellites. Prospect for stable earnings growth based on robust order backlog.  
     • Recommendation Rationale: Possesses unique technological capabilities in the precision guided weapon field. Experience in successfully winning large-scale overseas orders. Earnings stability based on abundant order backlog. Expanding investment in technology development for future warfare preparation.
     • Related Snippets:.  
  5. Poongsan (103140.KS):
     • Company Overview: Specialist in copper and copper alloy processing, and a major defense company producing ammunition (small caliber, medium/large caliber rounds, etc.).
     • Recent Performance/Financials: Earnings improvement expected due to rising copper prices and strong exports in the defense division. (Specific Snippet absent, based on external info).
     • Growth Outlook/Catalysts (May Focus): Increased exports due to surge in global ammunition demand (Ukraine war, etc.). Possibility of expanding ammunition exports to Eastern European countries like Poland. Earnings improvement in the copper wrought products division due to rising copper prices.
     • Recommendation Rationale: Direct beneficiary of the global ammunition shortage situation. High potential for export growth in the defense division. Possibility of additional profit improvement if copper prices rise. Possesses a stable business structure.
     • Related Snippets:.  

4.4. AI & Cloud Services / Data Centers

• Industry Outlook & Investment Rationale:

  • Global Context: The development and expanding application scope of Artificial Intelligence (AI) technology are accelerating digital transformation across all industries, leading to an explosive increase in demand for cloud services and data center infrastructure. Particularly, training and inference of generative AI models require massive computing resources, necessitating the construction of high-performance servers, network equipment, and large-scale data centers to accommodate them. The global cloud market is continuously growing, and not only IaaS (Infrastructure as a Service) and PaaS (Platform as a Service) but also the SaaS (Software as a Service) market integrated with AI functions are rapidly expanding.  
  • Domestic Situation: South Korea is also experiencing high growth in the cloud and data center markets, driven by strong government digital transformation policies (K-Digital Platform, K-Cloud Project) and active AI adoption efforts by companies. The domestic cloud market is expected to grow at a high annual average rate of around 24% , and the data center market is also projected to grow at an annual average of 12-13%, with AI data centers expected to achieve ultra-high-speed growth of over 36% annually. Global CSPs (Cloud Service Providers) like AWS, Microsoft Azure, and Google Cloud are expanding investments in the domestic market, while domestic companies like KT, SK Telecom, Naver Cloud, and Samsung SDS are competing by strengthening their own cloud platforms (SCP, etc.) and expanding MSP (Managed Service Provider) businesses. The adoption of hybrid and multi-cloud is increasing. Samsung SDS demonstrated the market's growth potential with high growth in its cloud division (up 23% YoY) in its Q1 earnings.  
  • US Comparison: The US data center market is also experiencing an unprecedented boom due to the surge in AI and cloud demand. However, securing power to meet the rapidly increasing electricity demand and introducing next-generation cooling technologies like liquid cooling to solve heat issues are emerging as major challenges. Increasing sustainability requirements and cybersecurity threats are also important considerations. The US IT services and software market is also expected to show robust growth in 2025, with particularly notable growth in data center and AI-related software fields.  
  • May Catalysts: Continuous news related to corporate AI adoption and cloud transition, announcements of data center investment plans by major domestic and international companies, spread of positive evaluations for related companies following Samsung SDS's strong Q1 performance, and the possibility of additional government digital policy announcements are positive factors.  
  • In-depth Analysis: The advancement of AI technology is driving the simultaneous growth of not only hardware like semiconductors but also the essential infrastructure for running and utilizing it, namely the data center and cloud service markets. South Korea, in particular, possesses a high level of network infrastructure (5G, broadband communication network), providing a favorable environment for the spread of AI and cloud services. The forecast for ultra-high-speed growth of AI-specialized data centers signifies great opportunities for companies involved in related infrastructure construction and operation, and solution provision. Beyond simply providing space and power through colocation services, demand will increase together for high-performance computing (HPC) cloud services supporting AI model development and operation, AI-based managed services (MSP), and related software and security solutions. Therefore, it is necessary to explore investment opportunities across this entire ecosystem.  

• Key Evidence Summary (Table):

  Table 4: AI & Cloud Services / Data Center Industry Investment Rationale Summary - May 2025

Factor	Related Data/Indicators	Source Snippet ID(s)	May Outlook & Implications
AI Adoption Proliferation	Acceleration of AI adoption across all industries, investment expansion centered on generative AI		Inevitable increase in demand for cloud and data center infrastructure to run AI.
Cloud Market High Growth (Korea)	Annual average growth forecast of 24% (2025-2030), spread of hybrid/multi-cloud		Growth expectation for domestic cloud service providers (CSP, MSP) and related solution companies.
Data Center Investment Expansion (Korea)	Annual average growth forecast of 12-13%, AI data centers expected to grow >36% annually, active investment by domestic/international major operators		Benefit for companies related to data center operation, construction, equipment, solutions. Especially acceleration of AI-related infrastructure construction.
Government Policy Support	Government digital transformation and AI nurturing policies like K-Digital Platform, K-Cloud Project		Policy support positively impacts market growth. Public sector cloud transition demand generation.
Major Company Strong Performance	Samsung SDS Q1 cloud business grew 23%, exceeding 40% of total IT service revenue		Performance proving market growth potential, positive impact expected on related company stock prices.
Technological Infrastructure Advantage	World's highest 5G and broadband communication network penetration rate		Provides a favorable environment for the spread of cloud and AI services.

 

• Top 5 Recommended Stocks:
  1. Samsung SDS (018260.KS):
     • Company Overview: IT service specialist of Samsung Group. Provides cloud (CSP, MSP), digital logistics (Cello Square), enterprise solutions, etc.
     • Recent Performance/Financials: Recorded strong Q1 2025 results (Revenue KRW 3.5T, Operating Profit KRW 268.5B). Cloud division revenue grew 23% YoY, accounting for over 40% of total IT service revenue.  
     • Growth Outlook/Catalysts (May Focus): Continued high growth of CSP business based on own cloud platform (SCP) (HPC service, public cloud, etc.). MSP business expansion centered on finance, retail. Full-scale business development of generative AI services (FabriX, Brity Copilot). Growth trend in subscribers and revenue of digital logistics platform 'Cello Square'.  
     • Recommendation Rationale: Key beneficiary of cloud and AI transition. Potential for synergy creation by possessing both CSP and MSP capabilities. Stable growth based on Samsung Group affiliate volume and expansion of external business. Growth potential of digital logistics platform.
     • Related Snippets:.  
  2. NAVER (035420.KS):
     • Company Overview: Korea's No. 1 internet portal and platform company. Operates Naver Cloud Platform (NCP), possesses own hyper-scale AI model 'HyperCLOVA X'.
     • Recent Performance/Financials: Q1 results not yet announced. Expectation for stable growth maintenance in existing businesses like search platform, commerce, content. Continued investment in cloud and AI divisions.
     • Growth Outlook/Catalysts (May Focus): Launch and commercialization of various B2B, B2C AI services based on HyperCLOVA X. Strengthening Naver Cloud Platform's targeting of public, financial markets. AI synergy creation with existing businesses like commerce, fintech. Global growth of content businesses like webtoons.
     • Recommendation Rationale: Representative domestic AI and cloud platform company. Possesses competitiveness of own hyper-scale AI model. Easy AI service expansion based on strong existing businesses like search, commerce. Cloud business growth potential.
     • Related Snippets: (Platform companies), (Local tech giants), (Platform companies).  
  3. Kakao (035720.KS):
     • Company Overview: Comprehensive platform company based on mobile messenger KakaoTalk. Operates Kakao Cloud, develops own AI model 'KoGPT'.
     • Recent Performance/Financials: Q1 results not yet announced. Focus on recovery trend in core businesses like advertising, commerce and cost efficiency efforts. Continued investment in AI and cloud.
     • Growth Outlook/Catalysts (May Focus): Launch of KoGPT-based AI services (chatbot, content creation, etc.) and integration with existing platforms like KakaoTalk. Expansion of Kakao Cloud into public, enterprise markets. AI synergy with subsidiary businesses like mobility, fintech.
     • Recommendation Rationale: Potential for AI service proliferation based on strong mobile platform. Expectation for cloud business growth and profitability improvement. AI application opportunities through diverse business portfolio.
     • Related Snippets: (Platform companies), (Local tech giants), (Kakao Corp mentioned as operator), (Platform companies).  
  4. KINX (093320.KQ):
     • Company Overview: Internet infrastructure specialist providing Internet eXchange (IX), data center (IDC), and cloud services.
     • Recent Performance/Financials: Maintains stable earnings growth trend. Benefiting from increased data center and cloud demand. (Specific Snippet absent, based on external info).
     • Growth Outlook/Catalysts (May Focus): IX service growth due to increased data traffic. Increased demand for IDC and cloud services due to cloud adoption spread and AI demand growth. Expectation for Gwacheon data center expansion effect.
     • Recommendation Rationale: Direct beneficiary of internet traffic increase and cloud proliferation. Competitiveness as a neutral IX operator. Stable business model and growth potential.
     • Related Snippets: (KINX mentioned as operator).  
  5. Gabia (079940.KQ):
     • Company Overview: Provides corporate IT infrastructure services such as domain, hosting, cloud, IDC, groupware.
     • Recent Performance/Financials: Steady earnings growth driven by cloud and IDC business growth. (Specific Snippet absent, based on external info).
     • Growth Outlook/Catalysts (May Focus): Benefit from increased cloud adoption by SMEs and startups. Strengthening competitiveness of own cloud (g클라우드). Increased demand for AI-related infrastructure. IDC expansion including Gwacheon data center.
     • Recommendation Rationale: Benefit from cloud and IDC market growth. High market share in the SME market. Service competitiveness based on own technology.
     • Related Snippets:.  

4.5. Renewable Energy & Components

• Industry Outlook & Investment Rationale:

  • Global Context: The global energy transition trend for climate change response and energy security is driving the structural growth of the renewable energy industry. Particularly, falling costs of solar and wind power generation, technological advancements, and strengthening policy support from various governments are promoting market expansion. Also, the Energy Storage System (ESS) market, which complements the intermittency issue of renewable energy, is growing concurrently.  
  • Domestic Situation: The Korean government has set a goal to increase the proportion of clean energy (including renewable energy and nuclear power) generation to over 70% by 2038, and plans to expand renewable energy generation capacity to 121.9GW, about four times the 2023 level. To this end, the 'Special Act on the Promotion of Offshore Wind Power' (OSW Promotion Act) recently passed the National Assembly, expected to accelerate offshore wind power project promotion through simplified permitting procedures, government-led site planning, and grid connection support. Furthermore, the increasing need to secure clean energy to meet the surging power demand of AI and semiconductor industries, and the expansion of voluntary renewable energy use requirements by companies like RE100, are also important growth drivers. The ESS market, essential for expanding renewable energy, also provides new opportunities for Korean battery companies.  
  • US Comparison: The US is also rapidly expanding renewable energy deployment, centered on solar and battery energy storage systems (BESS), driven by strong policy support such as the IRA (Inflation Reduction Act). Solar power generation in 2024 surged 27% year-on-year, and combined wind and solar generation surpassed coal for the first time. However, policy uncertainty has increased since the launch of the Trump administration, and issues like transmission grid expansion remain challenges. The US is focusing on strengthening domestic supply chains.  
  • May Catalysts: Possibility of follow-up enforcement decree preparation and specific project promotion plan announcements after the passage of the offshore wind special act, deepening discussions related to AI data center power demand, global renewable energy investment trends, and announcements of new project orders or technology development achievements by related companies could act as positive factors.  
  • In-depth Analysis: While Korea's renewable energy penetration rate is still low compared to the global average, the recent passage of the offshore wind special act could be a very important inflection point. This is because the legal foundation has been laid for previously sluggish offshore wind projects to be systematically promoted under government leadership. This has the potential to trigger the vitalization of a wide range of industrial ecosystems, not just an increase in generation capacity, but also related component (turbine, substructure, cable, etc.) manufacturing, installation and maintenance services, port infrastructure development, and further, green hydrogen/ammonia production. Particularly, the pressure to meet the massive power demand of cutting-edge industries like AI data centers in an eco-friendly manner will be a strong driver further accelerating renewable energy deployment. Therefore, the successful implementation of the law will be the key determinant of future industry growth.  

• Key Evidence Summary (Table):

  Table 5: Renewable Energy & Components Industry Investment Rationale Summary - May 2025

Factor	Related Data/Indicators	Source Snippet ID(s)	May Outlook & Implications
Government Policy & Targets	2038 clean energy share 70% target, Renewable capacity 4x expansion plan (11th Power Plan), Offshore Wind Special Act enacted		Strong policy support confirmed, heightened growth expectation especially in offshore wind sector.
Industrial Demand Increase	Surging power demand from AI/semiconductor industries, Expanding RE100 requirements for companies		Strengthening the necessity and demand base for renewable energy.
Offshore Wind Special Act Effect	Expectation for resolving business uncertainty through permit simplification, government-led site planning, grid connection support		Expectation for full-scale promotion of delayed offshore wind projects and vitalization of new investment.
ESS Market Concurrent Growth	Increased ESS demand to complement renewable energy intermittency, Opportunity for Korean battery firms in US market (tariffs on Chinese products)		Potential for battery companies to secure new growth engines.
Global Energy Transition	Worldwide trend of decarbonization and renewable energy expansion		Provides structural industry growth background.
Green Hydrogen/Port Linkage	Potential linkage with green hydrogen/ammonia production based on offshore wind and eco-friendly transition of port infrastructure		Expectation for long-term growth potential and ripple effects on related industries.

 

• Top 5 Recommended Stocks:
1. CS Wind (112610.KS):
   • Company Overview: Global No. 1 wind tower manufacturer. Possesses overseas production bases in the US, Vietnam, Europe, etc.
   • Recent Performance/Financials: Order increase trend following global wind market growth. Expectation for benefit from US policies like IRA. (Specific Snippet absent, based on external info).
   • Growth Outlook/Catalysts (May Focus): Order expectation from US offshore wind market opening. Long-term domestic market growth potential due to passage of domestic offshore wind special act. Global wind installation increase trend.  
   • Recommendation Rationale: Global leader in the wind tower market. Direct beneficiary of US IRA policy. Structural growth expected following domestic and international wind market growth. Secures additional growth engine when offshore wind market expands.
   • Related Snippets:.  
2. SK Oceanplant (100090.KS):
   • Company Overview: Formerly Samkang M&T. Specialist in offshore wind substructures (jackets, monopiles, etc.) and offshore plants.
   • Recent Performance/Financials: Earnings improvement trend due to increased offshore wind orders. Large-scale production facility investment in progress. (Specific Snippet absent, based on external info).
   • Growth Outlook/Catalysts (May Focus): Expectation for surge in substructure demand when domestic offshore wind market fully opens. Benefit from growth in Asian offshore wind markets like Taiwan, Vietnam. Possibility of offshore plant market recovery.  
   • Recommendation Rationale: Key player in the offshore wind substructure market. One of the biggest beneficiaries of the domestic offshore wind special act passage. Asian market growth potential. Investment in progress to secure large-scale production capacity.  
   • Related Snippets:.  
3. LS ELECTRIC (010120.KS):
   • Company Overview: Engaged in power equipment (transformers, circuit breakers, etc.), automation solutions, and smart energy businesses.
   • Recent Performance/Financials: Continued strong performance benefiting from power infrastructure investment expansion overseas, including the US. (Specific Snippet absent, based on external info).
   • Growth Outlook/Catalysts (May Focus): Continued trend of global power grid investment expansion. Increased demand for power infrastructure (transmission/distribution, substation) for renewable energy connection. Increased demand for power equipment due to data center expansion. Expansion of ESS-related business.  
   • Recommendation Rationale: Key beneficiary of the power infrastructure investment expansion cycle. Concurrent benefit from growth in renewable energy and data center markets. Stable business portfolio and overseas market competitiveness.
   • Related Snippets:.  
4. HD Hyundai Energy Solution (322000.KS):
   • Company Overview: HD Hyundai Group affiliate solar module and cell manufacturer. Competitive in high-efficiency solar products.
   • Recent Performance/Financials: Earnings fluctuate according to global solar market conditions. Pursuing sales strategy centered on the US market. (Specific Snippet absent, based on external info).
   • Growth Outlook/Catalysts (May Focus): Growth trend in US residential and commercial solar markets. Development of next-gen high-efficiency solar technology (perovskite, etc.). Potential benefit from domestic renewable energy expansion policy.  
   • Recommendation Rationale: Representative domestic solar module company. Growth strategy centered on the US market. Possesses high-efficiency product technology. Long-term solar market growth outlook remains valid.
   • Related Snippets:.  
5. Doosan Enerbility (034020.KS):
• Company Overview: Specialist in power generation equipment (nuclear, thermal, wind, etc.) and plant EPC (Engineering, Procurement, Construction). Developing next-gen energy technologies like SMR (Small Modular Reactor), gas turbines, hydrogen.
• Recent Performance/Financials: Order backlog increasing and financial structure improvement efforts in progress. (Specific Snippet absent, based on external info).
• Growth Outlook/Catalysts (May Focus): Movement to resume nuclear power plant (including SMR) construction domestically and internationally. Expansion of renewable energy business including offshore wind turbines. Expectation for commercialization of eco-friendly energy technologies like hydrogen turbines. Possibility of winning overseas plant orders in the Middle East, etc.  
• Recommendation Rationale: Possesses core technology in nuclear and wind power generation equipment fields. Growth potential in future energy markets like SMR, hydrogen. Potential benefit from changes in domestic and international energy policies.
• Related Snippets: (Clean energy target including nuclear), (Possibility of SMR introduction for data centers).

4.6. Biotechnology & Healthcare

• Industry Outlook & Investment Rationale:
  • Global Context: The global biotechnology market is expected to continue high growth of over 12% annually, driven by AI-based drug development , advancements in precision medicine and genomics , maturation of regenerative medicine technology , and increasing demand for biopharmaceuticals (especially antibody therapies, vaccines, cell/gene therapies). Particularly, the increase in chronic diseases and the aging trend are further fueling demand for innovative therapies and diagnostic technologies. Increasing M&A activity and expectations for improved capital accessibility are also positive factors for industry growth.  
  • Domestic Situation: The Korean bio industry has secured global competitiveness in biosimilars, regenerative medicine, and Contract Development and Manufacturing Organization (CDMO) fields. CDMO companies like Samsung Biologics are showing stable growth , and Celltrion leads the biosimilar market. In early 2025, domestic biotech companies like Alteogen and OliX consecutively signed multi-billion dollar technology export (Licensing Out) deals with global pharmaceutical companies, proving the excellence of Korean bio technology. This creates a virtuous cycle of securing R&D momentum by gaining recognition for technological prowess even in a difficult funding environment. The government is also continuing R&D investment and regulatory rationalization efforts to foster the bio-health industry as a future growth engine. In May, important Phase 3 clinical trial results for previously technology-exported new drug candidates are scheduled for release, and success is expected to increase the value of related companies. Expansion of digital healthcare and remote medical services integrating AI and 5G technology is also a noteworthy trend. However, the prolonged medical community strike could cause some disruptions to clinical trial progress in the short term.  
  • US Comparison: The US is the world's largest bio-healthcare market, leading advanced fields like AI drug development, precision medicine, and cell/gene therapies. Recently, the obesity treatment (GLP-1 series) market is growing explosively , and investments are concentrated in oncology, immunology, and rare disease fields. Changes in the medical service delivery system, such as increased hospital M&A and expansion of virtual care , are also appearing. FTC's stricter M&A regulation stance existed , but it might be eased under the Trump administration.  
  • May Catalysts: Expectation for Phase 3 clinical trial results release for technology-exported new drug candidates , additional technology export or M&A news , confirmation of stable earnings growth trend of CDMO companies like Samsung Biologics , and news on technological progress related to AI-based drug development could positively impact stock prices.  
  • In-depth Analysis: Recent large-scale technology export success cases by Korean biotech companies suggest that the technological maturity of the Korean bio industry has reached a global level, going beyond the performance of individual companies. Particularly, platform companies like Alteogen, which have secured unique competitiveness in specific technology fields such as SC formulation change platform technology, are being recognized for high value as they align with the needs of global pharmaceutical companies.