Lee Kwon-hee: "AI-Driven Goldilocks Is Coming"

Lee Kwon-hee said the arrival of ChatGPT 6.0 has brought a new inflection point to AI technology. He explained that the ten-year journey of ChatGPT, evolving from version 3.5 to 6.0, marks an important milestone signaling the start of AI. He stressed that while this is not yet AGI (artificial general intelligence) level, it is the first time end-to-end processing by AI agents has been implemented, bringing AI that directly helps with human work.

Lee noted that 100,000 of Nvidia's Grace Blackwell chips have already been deployed, with another 400,000 planned to upgrade the system. He analyzed that this will renew interest in hardware across the storage sector as well as semiconductors.

Market attention is moving from AI software back to hardware. As positive reviews from users who have actually used Astra AI spread, market participants have shifted their thinking toward investing in hardware rather than software. As a result, analysts expect stock movements centered on semiconductors to grow stronger than those driven by the macroeconomic environment.

Although bond yields are rising across major economies, Lee pointed out that the stock charts of major countries show no sign of collapse. By contrast, he assessed that the Korean market has entered a natural correction phase after a sharp rally. He stressed that the conventional inverse rate formula alone cannot explain the current market situation.

Since the 2008 global financial crisis, stock markets have been lifted mainly by liquidity supply, but now stock prices are rising even as rates climb. Lee stressed that this is because investment is active worldwide, with the U.S., Europe, Korea, and even Japan all expanding investment. This investment activity is serving as the key driver supporting the stock market despite pressure from rate hikes.

As defense and infrastructure investment expand, demand for money rises, and governments in particular are increasing fiscal spending, causing bond yields to climb and prices to fall. Lee argued that in this situation, moderate inflation should accompany growth to further promote expansion, and added that the U.S. government's push for AI growth can be understood against this backdrop.

He explained that the main cause of the plunge was an imbalance in supply and demand stemming from overheated leveraged investing in May and June. In fact, at the June peak the KOSPI index rose, but fewer than 100 stocks were advancing, showing that concentration in specific sectors had intensified, and many stocks had already turned downward from late May.

Initially, there were concerns that as data generation costs fell and semiconductor efficiency improved, demand would decline. From mid-August, however, this perception changed and the semiconductor market showed signs of rebounding. Lee explained that the 'Jevons paradox' had begun to resurface, a concept holding that as efficiency increases, AI usage surges and overall demand grows even more. In other words, efficiency gains do not lead to lower demand but instead spur greater use.

As AI agents come into full use, the fundamental nature of semiconductor demand is changing. Just as GPUs (graphics processing units) were needed in large numbers for training during the early days of LLMs (large language models), demand for computation from both CPUs (central processing units) and GPUs is now rising sharply. This is expected to bring broad-based demand growth across all types of semiconductors, including HBM (high-bandwidth memory), server DRAM (dynamic random-access memory), and NAND flash.

The proven high profitability of data center investment has led to analysis that rate hikes are not a major obstacle. Data center rents have risen more than threefold over the past three years, and a structure has settled in which investment can recoup its principal within a year even when borrowed at high financing rates (10–15%). Lee compared this situation to the 1980s high-rate period, when it was still possible to make money through investment, and argued that the importance of interest rates in today's economy has relatively diminished.

Lee Kwon-hee analyzed that current inflation, unlike in the past, stems from economic growth. Among U.S. economic officials, a common view is forming that today's inflation is not the chronic problem of the past, such as oil prices, nor inflation without growth. He stressed that inflation arising from growth is not dangerous and is instead creating a 'Goldilocks' environment that positively affects stock prices.

He said there is no need at all to panic over the current chart, and urged attention to growth driven by investment rather than the possibility of rate hikes, offering an optimistic outlook for the market.