KOSPI Plunges on Data Center Concerns After Midterm Elections as Debate Over AI Chip Demand Widens

Lee Kwang-soo emphasized the choice of “cannibalization”—investing in a new business that could eat into an existing one—through the contrasting transitions of Kodak and Netflix. Kodak engineer Steve Sasson invented the digital camera in 1975, but management, seeking to protect its film business, did not actively pursue the new venture, and the company eventually filed for bankruptcy protection in 2012. Netflix, by contrast, moved into streaming even as its DVD rental business was thriving, deciding to scale back its existing business.

After Netflix announced its shift to streaming in 2011, DVD subscribers fell by 800,000 over three months and its share price dropped from around $300 to $77, but the stock rose sharply over the longer term. Lee argued that companies can miss opportunities in the next era if they focus on preserving current earnings and existing businesses. His point was that a decision to sacrifice part of today’s profits to prepare for future businesses can determine a company’s long-term survival.

He applied this reasoning to the AI strategies of Google and Apple. Google, whose search advertising business faces a challenge from AI, is continuing to make large-scale AI investments, while Apple appears focused on protecting its existing iPhone business, he said. Lee argued that investors, too, should look beyond short-term share-price declines and current stability and assess companies preparing for industrial change from a long-term perspective.

Citing Warren Buffett’s announcement that he was buying U.S. stocks as share prices plunged during the 2008 financial crisis, Lee Kwang-soo said investors should reconsider fear and greed from the opposite perspective. If investors became greedy when South Korean equities surged, they should have treated that period with caution; but when everyone is fearful, as now, they should not make another poor choice because of past mistakes, he said.

He said sentiment in the current market may have swung to an extreme, with all news about semiconductors and AI being interpreted negatively. His view was that concerns were dominating the market despite no major change in fundamentals or existing demand. However, he stressed that refusing to sell solely because one has a long-term positive view of the market is a separate matter from reducing holdings when losses exceed what one can afford to bear.

Lee argued that efforts to support the domestic stock market are needed from the government, companies, the securities industry and investors alike. As with Chinese authorities’ moves to support the market decline through share buybacks and liquidity provision, the actions taken to build market confidence matter in themselves, he said. Even if share prices do not rebound immediately, sustained efforts to support the market can build investor confidence.