How Will the AI Chip Cycle Reshape South Korea’s Stock Market? The Investment Logic Behind KOSPI Semiconductor Twin Giants Samsung Electronics and SK Hynix

In July 2026, the global capital markets are undergoing a structural reshaping driven by the AI chip cycle. The Korea Composite Stock Price Index (KOSPI), one of the best-performing indices globally this year, has become unprecedentedly correlated with the semiconductor industry's cyclical conditions. In this AI-driven computing race, Samsung Electronics and SK Hynix, the two memory chip giants, have not only become the absolute weight pillars of the Korean stock market but also serve as a crucial window for observing the global AI capital cycle.

One Week of Wild Swings: KOSPI’s Roller Coaster Ride

On July 8 (Beijing time), the KOSPI index experienced a dramatic intraday reversal. According to Korea Exchange data, KOSPI opened at 7,452.48 points that day, a sharp drop of 203.83 points from the previous trading day, a decline of 2.66%. The decline widened quickly after the open, briefly dropping to around 7,352 points around 9:03 a.m. However, bargain hunters then stepped in, and the index gradually recovered—by 9:44 a.m., KOSPI was up 0.68% from the previous day at 7,708.42 points.

The backdrop for this volatility was the previous trading day (July 7), when KOSPI plunged as much as 8.22% intraday to 7,389.22 points, triggering a circuit breaker, and ultimately closing down 4.91% at 7,656.31 points. The trigger for this storm was precisely the market’s concentrated concern over the sustainability of the AI chip cycle.

How the AI Chip Cycle Reshapes the Korean Stock Market Structure

Understanding why the Korean stock market benefits from the AI chip cycle requires starting with changes in market structure.

Over the past six months, the Korean stock market, as a major beneficiary of the global AI rally, has heavily relied on the performance of semiconductor leaders. Samsung Electronics’ weight in KOSPI’s market cap has expanded from 21.37% at the beginning of the year to 28.07% as of July 6; SK Hynix’s share rose from 13.85% to 25.56% over the same period. Together, the two semiconductor giants account for more than half of the total market capitalization of the Korea Exchange. The Korean semiconductor index surged 92% from late February to June, while the non-semiconductor index rose only 0.02%.

This extreme concentration means that the movement of KOSPI is largely equivalent to the weighted performance of Samsung and SK Hynix alone. According to statistics from Korean securities firms, the semiconductor sector contributes about 90% of KOSPI’s earnings growth. Goldman Sachs analysts have previously warned that for every one percentage point rise in the combined weight of the two companies, foreign investors subject to U.S. diversified investment rules could be forced to sell about $20B from the Korean market.

Samsung Electronics: Record Earnings, Why Did the Stock Plunge?

On July 7 (Beijing time), Samsung Electronics released its second-quarter 2026 earnings guidance, which was stunning. The quarter’s sales are expected to reach approximately 171 trillion won (about $112.34 billion), a year-on-year increase of 129%; operating profit is expected to reach about 89.4 trillion won (about $58.8 billion), a massive increase of 84.72 trillion won from the 4.68 trillion won in the same period last year, representing a year-on-year surge of 1,810%. This figure even exceeded market expectations—previously, institutions had forecast Samsung’s second-quarter operating profit at around 86 trillion won.

However, this record-breaking guidance was met with a brutal "buy the rumor, sell the fact" reaction in the secondary market. On the day of the announcement, Samsung’s stock briefly plunged 10% intraday. On July 8 (Beijing time), Samsung continued its weakness, falling as much as 4.32% intraday to 283,500 won. As of 9:29 a.m. on July 8, Samsung was trading at 295,000 won, down 0.34% from the previous close. The previous trading day (July 7), Samsung had already fallen sharply by 6.92% to 296,000 won.

Why couldn’t the impressive earnings support the stock price? Albert Yong, managing partner at Petra Capital Management, pointed out, “Samsung’s strong earnings had already been widely expected by the market and were fully reflected in the continuous rally in the stock price beforehand. Now, investors are turning their gaze further ahead; what they really worry about is the sustainability of this AI frenzy and whether U.S. tech giants will slow down their capital expenditures on AI infrastructure.”

A deeper concern lies in the structure: The proportion of cloud service providers’ capital expenditures allocated to AI memory chips has risen sharply—expected to reach 52% this year and estimated to exceed 70% next year. Is this extreme spending structure sustainable? If the commercialization of AI services cannot keep pace with the expansion of hardware, the performance boom driven by computing power could face a correction at any time.

SK Hynix: HBM Leader’s Market Cap Surpasses and Volatility Amplifies

As the absolute leader in high-bandwidth memory (HBM), SK Hynix benefits more directly from this AI chip cycle. On June 22 (Beijing time), SK Hynix’s market cap briefly reached 2,082.5 trillion won intraday, surpassing Samsung’s 2,081.3 trillion won for the first time, becoming the highest-valued company in South Korea. Over the past year, Samsung’s stock has risen about 480%, while SK Hynix has gained more than 920%.

However, high gains also mean high volatility. On July 7, the day of the earnings guidance release, SK Hynix’s stock briefly plunged 8% intraday and fell over 10% during some trading sessions. In early trading on July 8 (Beijing time), SK Hynix fell as much as 4.77%, approaching the 2 million won mark, temporarily trading at 2,096,000 won. But it quickly rebounded, recovering to 2,256,000 won by 9:29 a.m., up 2.5%. As of 9:44 a.m. on July 8, SK Hynix’s gains expanded to over 4%.

Analysts remain optimistic about SK Hynix’s prospects. Kim Dong-Won, vice president of research at KB Securities, said that as the AI agent market rapidly expands from the cloud to edge devices such as PCs and mobile, overall memory demand, including HBM, server DRAM, and enterprise SSDs, will enter an acceleration phase, and SK Hynix’s stock price could rise to 3.8 million won. Hana Securities maintained a "buy" rating on SK Hynix with a target price of 3.6 million won.

Notably, on July 6, SK Hynix officially launched its IPO plan in the U.S., aiming to raise 43 trillion won (about $28 billion). If successful, this move will further enhance its global capital operations.

The Sustainability Debate of the AI Chip Cycle

The current market’s core divergence on the AI chip cycle lies in the sustainability of supply-demand dynamics.

Optimists believe the fundamentals of the memory chip industry remain solid. Analysts point out that industry fundamentals are still robust, and the global expansion of AI investment is expected to keep the memory chip supply shortage through 2028. In its latest research report, Nomura stated that market concerns over large-scale capacity expansion by Korean memory chip manufacturers and Meta’s intention to sell surplus computing power may be overstated; neither is sufficient to indicate that the AI-driven memory cycle is weakening. Nomura specifically noted that semiconductor industry construction and development cycles often take a long time, and projects announced by Korean chip giants may not materially impact supply for several years—SK Hynix’s "Yongin Semiconductor Cluster" project, started nine years ago, will not begin small-scale production until the end of 2027.

However, the concerned party also has ample logical reasoning. Samsung and SK Hynix recently jointly committed to investing up to 3,200 trillion won (about $2.07 trillion) to aggressively expand chip capacity in South Korea. The memory chip industry itself is cyclical—when memory prices soar, companies typically invest in building wafer fabs on a large scale, and it takes 2.5 to 3 years from the start of construction to full production. When these new capacities are released together, the supply-demand balance could reverse.

Citi Research’s industry monitoring data shows that in the second quarter of this year, the average selling prices of global DRAM and NAND rose 44% and 53% quarter-over-quarter, respectively. The average operating profit margin of the three major chip giants soared to between 75% and 80% in that quarter. Such extreme profit margins have historically been difficult to sustain over the long term.

Moreover, the Korean market’s heavy reliance on a single path—semiconductors—is itself a systemic risk: once the AI investment cycle cools, the Korean capital market and even the macroeconomy could be among the first to feel the pressure. Deutsche Bank’s "WOW Chart" analysis points out that the leap of memory companies from niche market participants to the trillion-dollar market cap club is a direct manifestation of the accelerated AI capital cycle. But the acceleration of capital cycles often also implies violent adjustments.

Conclusion

The logic behind the Korean stock market benefiting from the AI chip cycle is clear and robust—Samsung Electronics and SK Hynix, as oligopolists in the global HBM and DRAM markets, have become indispensable core suppliers in the wave of AI computing expansion. The excess returns of KOSPI, the leapfrog growth in market capitalization, and the sustained inflow of global capital are all market expressions of this logic.

However, every cycle has its own inherent rhythm. Current market concerns about excess AI computing power, the sustainability of capital expenditures, and the expansion of memory chip capacity are not unfounded emotional reactions but rational assessments based on industry patterns. For investors, understanding the deep bond between the Korean stock market and the AI chip cycle means both seizing opportunities for growth and maintaining a clear awareness of the risks of a cycle reversal.

Against the backdrop of increasing correlation between the crypto market and the Korean stock market, cross-market risk transmission mechanisms deserve continuous attention. Whether funds rotate between crypto assets and Korean stocks or engage in cross-market arbitrage through derivatives such as perpetual contracts, the boundaries between the two markets are becoming increasingly blurred.

FAQ

1. Why did Samsung Electronics’ stock plunge despite record earnings?

Samsung’s second-quarter operating profit surged 1,810% year-on-year to 89.4 trillion won, but the market is worried about the sustainability of the AI investment cycle. Investors believe the strong earnings were already fully reflected in the stock price and are beginning to fret over U.S. tech giants possibly slowing AI capital expenditures, as well as the sustainability of cloud service providers allocating an excessively high share (52% this year, over 70% next year) of their capex to AI memory chips.

2. Why did SK Hynix surpass Samsung Electronics in market capitalization?

SK Hynix holds a leading position in HBM (high-bandwidth memory), a core component for AI accelerators like NVIDIA GPUs. The AI wave has driven SK Hynix’s stock up over 920% in the past year, compared to Samsung’s roughly 480% gain. On June 22, SK Hynix’s market cap briefly surpassed Samsung’s, making it the most valuable company in South Korea.

3. How long can the high prosperity of the AI chip cycle last?

The market is divided. Optimists believe that global AI investment expansion will keep memory chip supply shortages through 2028; pessimists point to Samsung and SK Hynix’s plan to invest 3,200 trillion won in capacity expansion, with new capacity possibly concentratedly released after 2.5 to 3 years, which could reverse the supply-demand balance.

4. What are the main risks of investing in Korean AI-themed stocks?

Key risks include: KOSPI’s extreme dependence on the semiconductor sector (the two companies account for over 50% of market cap, and semiconductors contribute about 90% of KOSPI’s earnings growth); a slowdown in AI capital expenditure would directly impact chip demand; massive capacity expansion could lead to oversupply; and volatility in the crypto market could transmit to equities through derivative instruments.