KOSPI has surged close to 200% in roughly a year and this is not some small speculative stock.
KOSPI is South Korea’s benchmark stock market index just like NIFTY in India which means an entire market has gone through a historic rerating.
Let's try to understand the reason behind this boom -
South Korea quietly became one of the most important countries in the global AI supply chain.
𝗔𝗜 𝗿𝘂𝗻𝘀 𝗼𝗻 𝘀𝗲𝗺𝗶𝗰𝗼𝗻𝗱𝘂𝗰𝘁𝗼𝗿𝘀
Every AI model, cloud server and hyperscale data centre requires enormous computing power. That computing power depends heavily on advanced memory chips like DRAM and HBM (High Bandwidth Memory).
𝗦𝗼𝘂𝘁𝗵 𝗞𝗼𝗿𝗲𝗮 𝗱𝗼𝗺𝗶𝗻𝗮𝘁𝗲𝘀 𝗺𝗲𝗺𝗼𝗿𝘆 𝗰𝗵𝗶𝗽𝘀
- Samsung Electronics and SK Hynix are two of the world’s largest memory chip manufacturers. As AI adoption exploded globally, demand for these chips surged dramatically.
- For years, these companies were largely seen as traditional electronics manufacturers. But now investors see them as “AI infrastructure companies”, the equivalent of supplying shovels during a gold rush.
- Their dominance became so large that the combined market capitalisation of Samsung Electronics and SK Hynix crossed 40% of the entire KOSPI.
- That is extraordinary concentration for a benchmark index and shows how strongly the AI trade reshaped Korean markets.
𝗙𝗼𝗿𝗲𝗶𝗴𝗻 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗿𝗲𝘁𝘂𝗿𝗻𝗲𝗱 𝗮𝗴𝗴𝗿𝗲𝘀𝘀𝗶𝘃𝗲𝗹𝘆
- Korean markets historically traded at lower valuations because of the so-called “Korea Discount” concerns around governance and shareholder returns.
- But improving governance standards, stronger earnings and AI optimism brought global capital back into Korea.
𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻𝘀 𝘀𝘁𝗶𝗹𝗹 𝗹𝗼𝗼𝗸𝗲𝗱 𝗮𝘁𝘁𝗿𝗮𝗰𝘁𝗶𝘃𝗲
- Even after the rally, many Korean tech companies were still trading cheaper than comparable US AI-linked companies. Investors saw a rare combination of
a) AI exposure
b) Strong earnings growth
c) Global manufacturing dominance
d) Relatively lower valuations
And that combination triggered a massive rerating.
𝗧𝗵𝗲𝗿𝗲’𝘀 𝗮 𝗺𝘂𝗰𝗵 𝗯𝗶𝗴𝗴𝗲𝗿 𝗹𝗲𝘀𝘀𝗼𝗻 𝗵𝗲𝗿𝗲
The next generation of market leaders may not just be countries with large populations or strong consumption stories.
They may be countries that control critical layers of the global technology stack.
In the previous era, oil shaped global power.
In the AI era, semiconductors may do the same.