SAN FRANCISCO, JUNE 4 -- Soviet President Mikhail Gorbachev, concluding a multi-city American visit after the Washington summit, urged cheering Stanford University students today to join in what he called "the creation of a new civilization."

"The time is coming very close when the very principle of alliance must change," a smiling Gorbachev declared before an audience of 1,700 people, most of whose names had been drawn by computer lottery to secure coveted seats in Memorial Auditorium. "My friends, your generation will not only create a new world order but will live it."

Later in the day, Gorbachev and South Korean President Roh Tae Woo met in the Fairmont Hotel here, marking the end of 42 years of official silence between their countries. Roh said they agreed to move toward normalization of relations. {Details on Page A16}.

Gorbachev also later warned U.S. business leaders, as he did in Minneapolis Sunday, not to "stand on the sidelines" and miss the opportunity to invest in the Soviet economy. He said those unwilling to take risks would be left behind, perhaps by investors in Japan and other nations.

By midafternoon, running an hour late on his scheduled Bay Area tour but still raising friendly clasped hands at crowds gathered around him, Gorbachev also had chatted with artists and scholars and former president Ronald Reagan.

Reagan and his wife, Nancy, joined the Gorbachevs this morning for coffee at the residence of the Soviet consul general, whose elegant San Francisco home was deemed an appropriate location for what essentially was a personal reunion. The two men had met four times at summits during Reagan's presidency.

After their conversation, Reagan showed reporters contents of a small red box that he said Gorbachev had given him. "This is a medal that is actually from the Armenian people, and it's a message of thanks for our help to the people in Armenia after the earthquake," Reagan said. "So it is truly the American people who deserve this."

In early afternoon, Gorbachev went by limousine to Palo Alto for his upbeat Stanford address, which drew a standing ovation. It was among highlights of a hectic but jovial day of motorcades, ethnic demonstrations and the impromptu handshaking and conversation that have become one of his trademarks abroad.

Today's was a suitably San Francisco sort of commotion for the Soviet president's last U.S. stop before departure for Moscow at 7:46 p.m. PDT. He had asked to end the visit in a region famous for its physical beauty and the ethnic diversity of its population.

At a Chamber of Commerce luncheon attended by 150 corporate executives at the Fairmont, Gorbachev tried to attract investment in the Soviet Union despite his country's deep economic crisis. In almost a dreamy tone, he discussed the possibility of business cooperation in space exploration, the computer industry and aircraft construction.

"You are wondering whether involvement in the Soviet Union could be a trap, whether you could lose money," Gorbachev said. "While risk is good in politics and business, adventurism is bad, and I am for a careful approach, a balanced approach."

Gorbachev also said the Soviet Union would be trying especially to develop its resources in the Soviet Far East. He said there would be great benefits to Western enterprises willing to take a risk and warned against those who remain "on the sidelines."

Roger Baccigaluppi, president and chief executive officer of Blue Diamond nut growers, said afterward that Gorbachev's most practical move was his promise to make the ruble convertible into other currencies.

"Ten years ago, if I told you that the Soviet Union was going to make statements like this, people would have laughed," said Baccigaluppi, whose company is the seventh-largest U.S. exporter to the Soviet Union and last year did $25 mil- lion worth of business with that country.

"It gets easier and easier, and better and better, doing business with them," he said. "What we see today would have been impossible even five years ago."

The pragmatic orientation of the Chamber of Commerce luncheon contrasted with the more visionary tone set by Gorbachev at Stanford, where university President Donald Kennedy introduced the Soviet leader as "the architect of a great world transformation."

As his audience heard simultaneous translation through individual earphones, Gorbachev reminded listeners that San Francisco had been the site of the original founding of the United Nations.

From that, Gorbachev said, came important principles of international cooperation and basic human rights. "Those are beautiful words -- it's a moving appeal -- but alas, it's only recently we've been able to move toward the performance of these tasks in political terms," he said.

So much has changed, Gorbachev said, both in his own country and in the world order, that the international politics must learn entirely new ways of defining nations's relations to each other.

"The Cold War is now a thing of the past, and I don't think we should stress who won a victory," Gorbachev said to sustained applause. "The time has come when the very principle of alliance must change."

In the international landscape of the future, Gorbachev said, comparative military strength must no longer be the driving force for individual national economies or relations between nations.

Quoting Alexander Herzen, a 19th-century Russian humanist, Gorbachev described the Pacific as "the Mediterranean of the future" and celebrated a new era in which the superpowers no longer were "on opposite sides of the barricades of Asian revolutions" but instead sharing in "new standards of economic efficiency set by Asian nations."

Gorbachev said he was impressed by California's economic and technical achievements, and the state's status as a more productive economy than that of all but five countries in the world.

He said he was even more pleased to hear that many local officials in nearby Santa Clara County, noting their reliance on defense contracts, had begun discussions over how to "demilitarize the local economy."

Gorbachev praised several Stanford faculty members, including political science Professor David Holloway and engineering-economic systems Professor William Perry, for being "the first to speak out against the folly {of the arms race} and look for a way out."

He said he hoped that scientists here and in the Soviet Union could cooperate in research on safe disposal of chemical and nuclear weapons "to make sure there is no danger to the environment and the people's health" after he and President Bush had resolved "to abolish these weapons."

Tolerance, Gorbachev said, must be the most important guiding principle of future generations.

"The alpha and omega of the new world order is patience and toleration," Gorbachev said. "Without that, and without respect for your partners, and understanding of the concerns of each other, nothing is possible."

After the address, former secretary of state George P. Shultz gazed at Gorbachev from the podium and said, "As you have so often, you light up the landscape with your ideas. You are a great leader. We are at a moment in history when there is a chance to design the shape of what is ahead of us . . . . We need you."

The audience roared approval, which may have cheered Gorbachev nearly as much as the remarkable sight later of 150 American chief executive officers sporting hammer-and-sickle pins on their lapels.

"Three years ago, I had no idea anything like this could occur . . . ," said Myron DuBain, retired chairman of Fund American Companies. "Here I am listening to the president of the Soviet Union, and in my mind all I can think of is, 'How are we going to help him? How are we going to work with him? How are we going to cooperate with him?' There was no feeling of confrontation at all."

Staff writers Guy Gugliotta, Eleanor Randolph and David Remnick contributed to this report.