South Korea AI rally cools as trading activity drops 70% from May peak

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Korea’s AI rally fades as trading activity collapses

Samsung and SK Hynix concentration turns into a vulnerability

One of the Korean market’s biggest weaknesses is its reliance on two dominant memory-chip producers. Samsung Electronics and SK Hynix together account for more than half of the KOSPI’s weighting, meaning any shift in sentiment toward memory stocks can quickly spill over into the entire index.

Foreign investors sold more than 20 trillion won worth of KOSPI stocks in September, with much of the outflow concentrated in Samsung and SK Hynix. Cumulative foreign selling between September 1 and October 2 reached roughly 20.3 trillion won, or $15.1 billion.

Signs of fatigue are visible even when corporate results remain strong. Samsung reported an almost ninefold increase in quarterly operating profit, supported by robust demand for memory used in AI infrastructure, yet the stock fell following its preliminary earnings release. The reaction underscores how demanding investor expectations have become after the earlier rally.

Investors increasingly favour Taiwan for AI exposure

Some global capital is now rotating toward Taiwan, where AI exposure is spread across a broader mix of hardware makers, component suppliers and semiconductor companies. That leaves the market less dependent on a single segment of the AI supply chain.

The Taiex has gained roughly 70% year to date and outperformed the KOSPI by about 23 percentage points last quarter. UBS has also highlighted Taiwan’s broader technology ecosystem, alongside continued plans by major global companies to increase capital spending on AI infrastructure.

That does not mean the investment case for South Korea has disappeared. Memory chips remain a critical part of the AI infrastructure buildout, while lower valuations may eventually create opportunities for long-term investors. After such a powerful rally, however, the market is demanding stronger evidence that today’s elevated memory prices and profit margins can endure.

Korea’s sell-off exposes broader risks in the AI trade

Cooling demand for Korean equities points to a wider issue across the global AI rally: a growing share of market returns is being driven by a relatively small group of companies and closely linked investment themes.

That concentration now extends well beyond chipmakers. AI infrastructure increasingly ties together technology stocks, energy, data centers, real estate and private equity, making traditional diversification less effective than it may appear. More on how the AI trade is reshaping global portfolios and increasing concentration risk is available in the Traders Union analysis.

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