Korean construction stocks outperformed the broader market this month through the 6th, with the KRX Construction Index rising approximately 18.2% while the KOSPI fell 4.5% and major semiconductor stocks declined during the same period. The sector rotation was driven by AI data center investment announcements from domestic companies and global tech firms, government infrastructure expansion plans, and better-than-expected second-quarter earnings from major construction firms. GS Construction rose approximately 39% from 22,450 won to 32,600 won, ranking third among KOSPI gainers, while Daewoo E&C gained 32%, DL E&C rose 23%, and Hyundai E&C climbed 19%.
Korean Construction Stocks Rise 18.2% While Semiconductors Decline
According to Korea Exchange data, the KRX Construction Index rose approximately 18.2% from the beginning of this month through the 6th, marking the steepest climb among KRX sector indices. During the same period, the KOSPI fell 4.5%, the KRX Semiconductor Index dropped 6.8%, SK Hynix declined 13.0%, and Samsung Electronics fell 12.2%. GS Construction rose from 22,450 won to 32,600 won, an increase of approximately 39%, securing the third-highest gain on the KOSPI. Daewoo E&C rose 32%, DL E&C gained 23%, and Hyundai E&C climbed 19%.
SK Telecom and Naver Announce AI Data Center Expansion Plans
Investment plans announced at the recent AI Summit in San Francisco stimulated investor sentiment. SK Telecom plans to build and expand gigawatt (GW)-class AI data centers in partnership with NVIDIA, Anthropic, and Amazon Web Services (AWS). Naver plans to expand its Sejong AI Factory from the existing 55MW to 200MW based on NVIDIA's investment and Brookfield's financial support, with long-term plans to build GW-class infrastructure.
Government Plans 8.4GW AI Data Center Capacity by 2029
The government plans to expand AI data center capacity to 8.4GW by 2029 and to 18.4GW by 2035. The Phase 1 investment alone amounts to approximately 550 trillion won, with SK, GS, and Naver expected to participate. Expectations are growing that construction companies with relevant construction experience will benefit from these projects.
Texas Power Plant Project Draws Market Attention
The US power shortage is also being cited as a new opportunity. Power plant investment is expected to expand as data center electricity demand surges, centered on Texas. The market is also paying attention to the possibility that the Texas Encinal gas combined-cycle power plant project will be selected as Korea's first US investment project.
Construction Companies Report Q2 Earnings Above Expectations
Improved earnings from construction companies are also supporting stock prices. Hyundai E&C, Samsung E&A, Daewoo E&C, and DL E&C recently announced second-quarter results that exceeded market expectations, demonstrating profitability improvements. Profit forecasts have been revised upward following the earnings announcements.
Analysts Highlight Data Centers as New Growth Driver
Ryu Tae-hwan, a researcher at DB Securities, explained that "AI data centers and power plants are emerging as new investment points as the nuclear power momentum weakened somewhat in the first half." Ryu stated that "power plant investment will expand in the US as supplying electricity on time becomes more important than the type of power source," adding that "Korean construction companies' entry into the US energy market may begin in earnest." He presented DL E&C as the sector's top pick, noting that "data centers and power plants are establishing themselves as new growth pillars and profit estimates are being revised upward."
Bae Se-ho, a researcher at iM Securities, analyzed that "the 'Korea Great Leap Forward 3 Major Mega Projects' announced by the government and companies will have a positive impact on the domestic construction economy," noting that "the expected building construction area alone is approximately 37 million square meters, reaching 46% of last year's domestic building construction area." Bae recommended Samsung E&A as the construction sector's top pick, stating that "Hyundai E&C, GS E&C, DL E&C, and Samsung C&T are expected to benefit as they have data center construction experience."
Shin Dae-hyun, a researcher at Kiwoom Securities, projected that "although the impact of property tax and capital gains tax reforms is limited, the second home taxation special treatment and regional investment tax benefits are positive for the recovery of the non-metropolitan real estate market," adding that "if non-metropolitan housing transactions revive, it will also help construction companies expand new construction starts."
FAQ
Q: Which Korean construction stocks showed the strongest gains this month through the 6th?
A: GS Construction rose approximately 39% from 22,450 won to 32,600 won, ranking third among KOSPI gainers. Daewoo E&C gained 32%, DL E&C rose 23%, and Hyundai E&C climbed 19%. The KRX Construction Index rose approximately 18.2%, the steepest climb among KRX sector indices.
Q: What AI data center investment plans did Korean companies announce recently?
A: SK Telecom plans to build and expand gigawatt-class AI data centers with NVIDIA, Anthropic, and AWS. Naver plans to expand its Sejong AI Factory from 55MW to 200MW with NVIDIA investment and Brookfield funding, with long-term plans for GW-class infrastructure. The government plans to expand AI data center capacity to 8.4GW by 2029 and 18.4GW by 2035, with Phase 1 investment of approximately 550 trillion won.
