Korean AI Boom: The Crash Was Just the Beginning of the Suspense

A Facebook post interrupted Korea’s stock market surge toward 8,000 points.

On that day, the KOSPI experienced a maximum intraday drop of over 7%, with Samsung and SK Hynix losing hundreds of trillions of won in market value. The trigger for this turbulence was just a question from the chief policy advisor to the Korean president: Samsung and SK Hynix’s net profits in the first quarter surged by 755% and 398%, respectively. This excess profit brought by AI—why shouldn’t it be shared with all citizens (“citizen dividends”)?

This is not a normal market correction. The term “citizen dividends” has no definition to date, and a word without a clear definition hanging in the air is the real risk in this story.

One post, ending the celebration of hitting 8,000 points early

On May 11, the KOSPI triggered a circuit breaker, closing up 5%, with SK Hynix’s market value surpassing 1,000 trillion won.

Early on the 12th, continuing the previous day’s excitement, the KOSPI continued to rise to 7,999.68 points—just 0.03 points shy of the historic “8,000-point milestone.”

Then, a Facebook post from Kim Yong-beom, head of the presidential policy office, appeared:

If the strategic importance of the AI infrastructure supply chain creates structural prosperity and brings about historic-level excess tax revenue, then how to use this money is not a choice but a design question that should be seriously considered.

—Proposed principle of ‘National Dividend’ (tentative name)

The market’s interpretation boiled down to four words: Tax Samsung.

The financial reports of the two companies are clear: SK Hynix’s first-quarter net profit was 40.35 trillion won, up 398% year-on-year, with an operating profit margin of 72%; Samsung’s first-quarter operating profit was 57.2 trillion won, up 755%, just having joined the trillion-dollar market cap club. The term “excess profit” leaves no ambiguity when looking at these two financial statements.

The KOSPI dropped directly through 7,400 points from 7,999, with a maximum intraday decline of over 7%.

“Excess tax” is an unmarked ruler—that’s the real risk

A few hours later, Kim Yong-beom clarified: the source of funds is the “excess tax revenue” generated by AI prosperity, not a new mechanism of directly taxing companies. The KOSPI stabilized, with the closing decline narrowing to 2.29% (at 7,643.15 points). Mirae Asset’s top traders bought Samsung and SK Hynix on dips.

But the phrase “excess tax revenue” is a ruler without markings.

It can be interpreted in two very different ways.

Moderate version: Korea’s corporate taxes naturally overshoot due to AI boom, and the government will incorporate the excess into the general budget, directing subsidies to low-income groups—this has no real impact on the actual profits of Samsung and SK Hynix, just a redistribution of fiscal funds.

Radical version: Based on a certain profit margin or ROE threshold, the excess portion is taxed separately as an “excess profit tax,” similar to Norway’s 78% special petroleum tax on oil companies—this would be the heaviest tax mechanism ever applied to tech companies in Korea, with a structural impact on Samsung and SK Hynix’s EPS.

Today’s clarification only confirms “not directly taxing companies,” but does not exclude the possibility of establishing any new mechanism in the future.

The huge gap between these two interpretations is why the market closed down 2.29% instead of returning to flat—the market neither priced in the worst case nor believed everything was normal.

42.2% concentration, a natural amplifier of policy risk

Today’s sharp decline is also a product of the KOSPI’s own structure.

Samsung and SK Hynix together account for 42.2% of the KOSPI market value, a record high, nearly doubling from 22.6% at the start of 2025—these two stocks’ weight is almost half of the entire index.

This structure means: any explicit or implied policy signals targeting Samsung or SK Hynix will be amplified on the KOSPI beyond what fundamentals would suggest. The next time such a statement is made, based solely on concentration, the market’s reaction will be even faster and more intense.

Lee Jae-myung’s track record: from Seongnam youth dividends to AI citizen dividends

Many interpret Kim Yong-beom’s statement today as “a political gesture that won’t be implemented.” This judgment underestimates Lee Jae-myung’s government’s determination to execute on such issues.

Lee Jae-myung is Korea’s president with the deepest obsession with basic income in history, and he has a consistent track record of implementation.

In 2016, as mayor of Seongnam, he launched Korea’s first local government basic income project, “Youth Dividend,” giving all 24-year-olds in Seongnam 1 million won annually; from 2018 to 2021, as governor of Gyeonggi Province, he expanded the coverage to the entire province, becoming Korea’s largest basic income pilot in history; after being elected president in 2025, the cabinet approved a nationwide subsidy plan of 15.2 trillion won in July, distributing at least 150k won in vouchers to all citizens, with up to 600k won for vulnerable groups.

The timing of Kim Yong-beom’s post was carefully chosen: May 11, when the KOSPI triggered a circuit breaker and SK Hynix’s market value hit a record high—when market sentiment was most euphoric and political tolerance was highest. The clarification came very quickly, within hours, indicating that a withdrawal plan was already prepared.

What’s even more worth pondering is the mechanism itself: policymakers use social media to probe boundaries, market reactions to calibrate limits, and clarifications to rein in overhyped expectations—this cycle will repeat, and the next time, they will be more precise.

Bulls may still be right, but their assumptions now have a crack

Citi raised Samsung’s target price from 300k won to 460k, and SK Hynix from 1.7 million to 3.1 million last week. The current bullish logic for the KOSPI is based on an assumption: policy statements will not translate into concrete tax mechanisms, and the AI supercycle continues. This assumption remains mainstream today and may well be correct.

But the ambiguity of the “excess tax” definition cannot be underestimated.

If we take 2023 as the baseline year before the AI boom, SK Hynix’s first-quarter net profit alone already exceeded the total for all of 2023—meaning the “excess tax” scale, even at a 5% rate, would surpass 2 trillion won per quarter. This is not direct taxation on companies, but once institutionalized, it will continually reinforce the political feasibility of expanding “citizen dividend” policies, further lowering the market’s tolerance for similar policy risks.

Today’s 2.29% decline is the market’s price for the “undefined”—the real decision point is: when will the Korean government assign a specific number or percentage to the “excess tax”? From that moment, the 42.2% concentration in the KOSPI will cause responses to be much faster and larger than today’s.

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        The market carries risks; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein are suitable for their particular circumstances. Invest at your own risk.