In July 2026, global capital markets are undergoing a structural transformation driven by the AI chip cycle. The Korea Composite Stock Price Index (KOSPI), one of the world’s best-performing indices this year, has become tightly linked to the fortunes of the semiconductor sector. In this AI-powered race for computing power, Samsung Electronics and SK Hynix—two giants in memory chips—are not only the dominant pillars of Korea’s stock market, but also key indicators for the global AI capital cycle.
A Volatile Week: KOSPI’s Roller-Coaster Ride
On July 8 (Beijing time), the KOSPI index experienced a dramatic intraday reversal. According to data from the Korea Exchange, KOSPI opened at 7,452.48, dropping sharply by 203.83 points from the previous trading day—a decline of 2.66%. The losses deepened quickly after the open, with the index plunging to around 7,352 by 9:03 a.m. However, bargain hunters soon stepped in, and the index began to recover. By 9:44 a.m., KOSPI was up 0.68% compared to the previous day, closing at 7,708.42.
This extreme volatility followed an even more dramatic session on July 7, when KOSPI plunged 8.22% intraday to 7,389.22, triggering circuit breakers, and ultimately closed down 4.91% at 7,656.31. The catalyst for this turmoil was concentrated market concern about the sustainability of the AI chip cycle.
How the AI Chip Cycle Is Reshaping Korea’s Stock Market
To understand why Korea’s stock market is benefiting from the AI chip cycle, we must first look at how market structure is changing.
Over the past six months, Korea has emerged as a primary beneficiary of the global AI rally, with its stock market heavily reliant on semiconductor leaders. Samsung Electronics’ weight in KOSPI’s market capitalization has risen from 21.37% at the start of the year to 28.07% as of July 6. SK Hynix’s share has jumped from 13.85% to 25.56% over the same period. Together, these two semiconductor giants now account for more than half of the total market capitalization on the Korea Exchange. The Korea Semiconductor Index soared 92% from late February to June, while the non-semiconductor index edged up just 0.02%.
This extreme concentration means KOSPI’s performance is largely a weighted average of Samsung and SK Hynix. According to Korean securities firms, the semiconductor sector contributed roughly 90% of KOSPI’s earnings growth. Goldman Sachs analysts previously warned that for every additional percentage point these two companies gain in combined weighting, foreign investors—bound by US diversification rules—could be forced to sell about $20 billion worth of Korean stocks.
Samsung Electronics: Record Earnings, Yet Shares Plunge
On July 7 (Beijing time), Samsung Electronics released its Q2 2026 earnings guidance, and the numbers were nothing short of spectacular. Sales are expected to reach about KRW 171 trillion (approximately $112.34 billion), up 129% year-over-year. Operating profit is projected at KRW 89.4 trillion (about $58.8 billion), a staggering increase of KRW 84.72 trillion from last year’s KRW 4.68 trillion—an 1,810% surge. These figures even beat market expectations, as analysts previously forecasted Q2 operating profit at around KRW 86 trillion.
Despite this record-setting guidance, the secondary market responded with a classic "buy the rumor, sell the news" scenario. On the day of the announcement, Samsung’s stock plunged as much as 10% intraday. On July 8 (Beijing time), the weakness continued, with shares dropping 4.32% to KRW 283,500. As of 9:29 a.m., Samsung was trading at KRW 295,000, down 0.34% from the previous close. The prior trading day (July 7) saw a steep 6.92% decline to KRW 296,000.
Why couldn’t stellar earnings support the share price? Albert Yong, Executive Partner at Petra Capital Management, explained, "Samsung’s strong profits were already widely anticipated by the market and reflected in the previous rally. Now, investors are looking further ahead—they’re genuinely concerned about the sustainability of the AI boom and whether US tech giants might slow capital spending on AI infrastructure."
A deeper concern is that the proportion of cloud service providers’ capital expenditure allocated to AI memory chips is rising sharply—expected to reach 52% this year and over 70% next year. Is this extreme spending structure sustainable? If the commercialization of AI services lags behind the expansion of hardware, the performance party driven by computing power could face a correction at any time.
SK Hynix: HBM Leader Surpasses Samsung in Market Cap Amid Heightened Volatility
As the undisputed leader in high-bandwidth memory (HBM), SK Hynix has benefited even more directly from the current AI chip cycle. On June 22 (Beijing time), SK Hynix’s market cap surged to KRW 208.25 trillion, overtaking Samsung’s KRW 208.13 trillion for the first time and becoming Korea’s most valuable company. Over the past year, Samsung’s stock rose about 480%, while SK Hynix soared over 920%.
However, high returns come with high volatility. On July 7, following the earnings guidance release, SK Hynix shares plunged as much as 8% intraday, and at times fell more than 10%. In early trading on July 8 (Beijing time), SK Hynix dropped 4.77%, nearing the KRW 2 million mark and temporarily trading at KRW 2,096,000. The stock then rebounded sharply, reaching KRW 2,256,000 by 9:29 a.m., up 2.5%. By 9:44 a.m., SK Hynix’s gains had expanded to over 4%.
Analysts remain optimistic about SK Hynix’s outlook. Kim Dong-Won, Deputy Head of Research at KB Securities, noted that as the AI agent market rapidly expands from the cloud to PCs and mobile edge devices, demand for HBM, server DRAM, and enterprise SSDs will accelerate, potentially pushing SK Hynix’s share price to KRW 3.8 million. Hana Securities maintains a "buy" rating on SK Hynix, with a target price of KRW 3.6 million.
Notably, SK Hynix officially launched its US IPO plan on July 6, aiming to raise KRW 43 trillion (about $28 billion). If successful, this move would further enhance its global capital operations.
The Debate Over the Sustainability of the AI Chip Cycle
The central divide in today’s market regarding the AI chip cycle centers on the sustainability of supply and demand.
Optimists argue that the fundamentals of the memory chip industry remain solid. Analysts point out that global AI investment expansion is expected to keep memory chip shortages going until 2028. Nomura’s latest research notes that concerns over large-scale expansion by Korean memory chip makers and Meta’s plans to sell surplus computing power may be overstated, and neither is sufficient to suggest a downturn in the AI-driven memory market. Nomura specifically highlights that semiconductor industry construction and development cycles are lengthy, and projects announced by Korea’s chip giants may not materially impact supply for years—SK Hynix’s "Yongin Semiconductor Cluster," launched nine years ago, won’t begin small-scale production until the end of 2027.
On the other hand, skeptics have solid reasoning. Samsung and SK Hynix recently pledged to invest up to KRW 32 trillion (about $2.07 trillion) to massively expand chip production in Korea. The memory chip sector is inherently cyclical—when memory prices surge, companies typically build new wafer fabs, which take 2.5 to 3 years from groundbreaking to full capacity. When this new capacity comes online, supply-demand dynamics can reverse.
Industry monitoring by Citi Research shows that in Q2 this year, average selling prices for global DRAM and NAND jumped 44% and 53% quarter-over-quarter, respectively. The three major chip giants saw their average operating profit margins soar to 75–80%. Historically, such extreme profitability is rarely sustainable for long.
Additionally, Korea’s market dependence on a single semiconductor path is itself a systemic risk—if the AI investment cycle cools, Korea’s capital markets and macroeconomy could feel the pressure first. Deutsche Bank’s "WOW Chart" analysis notes that the leap of memory companies from niche players to trillion-dollar market caps directly reflects the acceleration of the AI capital cycle. But rapid capital cycles often mean more dramatic adjustments.
Conclusion
The logic behind Korea’s stock market benefiting from the AI chip cycle is clear and robust—Samsung Electronics and SK Hynix’s oligopoly in the global HBM and DRAM markets makes them indispensable suppliers in the AI computing power expansion wave. KOSPI’s outsized returns, explosive market cap growth, and sustained global capital inflows all reflect this logic.
Yet, every cycle has its own rhythm. Current concerns about AI computing power oversupply, the sustainability of capital spending, and memory chip capacity expansion are not just emotional reactions—they are rational assessments based on industry fundamentals. For investors, understanding the deep linkage between Korea’s stock market and the AI chip cycle means recognizing both the opportunities for growth and the risks of a cyclical reversal.
As the connection between crypto markets and Korea’s stock market grows stronger, cross-market risk transmission mechanisms deserve ongoing attention. Whether capital rotates between crypto assets and Korean equities, or moves through perpetual contracts and other derivatives for cross-market arbitrage, the boundaries between these markets are becoming increasingly blurred.
FAQ
1. Why did Samsung Electronics’ record earnings coincide with a share price plunge?
Samsung Electronics’ Q2 operating profit surged 1,810% year-over-year to KRW 89.4 trillion, but the market is concerned about the sustainability of the AI investment cycle. Investors believe strong earnings were already priced in, and are now worried that US tech giants may slow AI capital spending, as well as the sustainability of cloud providers’ capital expenditure on AI memory chips (expected to be 52% this year and over 70% next year).
2. How did SK Hynix surpass Samsung Electronics in market capitalization?
SK Hynix leads the HBM (high-bandwidth memory) sector, and HBM is a core component for AI accelerators like NVIDIA GPUs. The AI wave pushed SK Hynix’s share price up over 920% in the past year, while Samsung Electronics rose about 480%. On June 22, SK Hynix’s market cap surpassed Samsung’s for the first time, becoming Korea’s most valuable company.
3. How long can the AI chip cycle’s high prosperity last?
Opinions diverge. Optimists believe global AI investment expansion will keep memory chip shortages going until 2028. Skeptics point out that Samsung and SK Hynix plan to invest KRW 32 trillion in capacity expansion, and new production could come online in 2.5–3 years, potentially reversing supply-demand dynamics.
4. What are the main risks of investing in Korean AI concept stocks?
Core risks include: KOSPI’s extreme reliance on the semiconductor sector (the two companies account for over 50% of market cap), semiconductors contribute about 90% of KOSPI’s earnings growth, and any slowdown in AI capital spending will directly impact chip demand. Large-scale capacity expansion could lead to oversupply, and volatility in crypto markets may transmit risk to equities through derivatives.
