Does trouble lie ahead for South Korea’s star tech stocks?
Over the past 18 months, South Korea’s main stock market has burst back onto the global investment scene, led by a staggering recovery for the Kospi index.
The country’s blue chip index had been plagued by the impeachment of President Yoon Suk Yeol and companies trading at significantly lower valuations compared to emerging market peers before investors were able to look past the turmoil with Seoul providing a route to the wider AI boom.
The Kospi powered up 75.6 per cent in 2025, hitting 4,214.1 points, with the index picking up speed in 2026, surpassing the 7,000 point mark.
Analysts have credited the rise to the performance of index heavyweights Samsung and SK Hynix, which accounted for 58 per cent of total market cap as of 30 April, according to MSCI.
But on Monday the semiconductor surge came to a screeching halt, as Asian markets fell victim to a widespread tech selloff which sparked in New York, caused by the Nasdaq tumbling 4.2 per cent on Friday.
When the shockwaves reached the Kospi, it plunged 10 per cent in early trade. It pared the slump to a 8.2 per cent loss, hovering at 7,484.4 points, leaving a far cry from the 8,000-mark neared last week.
And Seoul’s heavy reliance on tech left it looking especially vulnerable to any sustained turn in sentiment. Those two big names alone, Samsung and SK Hynix, accounted for 58 per cent of the Kospi’s total market cap as of 30 April, according to MSCI.
Investors who have pulled out cash are now questioning if its historic rally is coming to an end.
Battered and bruised tech stocks
SK Hynix tumbled 7.6 per cent to 1,911,000 KRW (£935.4) during Monday trading, while Samsung suffered a 10.2 per cent fall to 293,000 KRW.
The sell-off came as investors became increasingly concerned about stretched valuations of companies riding the AI wave, leaving chipmakers and memory groups floundering.
The plunge was deemed severe enough by the Korea Exchange to trigger a 20 minute trading halt and hold an emergency meeting to discuss ensuring market stability amid ongoing volatility.
Foreign investors also sold a net $10bn worth of Korean shares in the last week alone, which in turn placed further pressure on the won.
The currency has hit its lowest level against the dollar since March 2009, leading the Korean government to announce a series of measures to boost the won, including vowing to take action against speculative trading.
Katy Stoves, investment manager at Mattioli Woods, said: “The rally has essentially been driven by Samsung and SK Hynix, which together make up around 50 per cent of the index.
“Investors may be waking up to the fact that this concentration isn’t sustainable given the three-digit gains both names have posted in recent months which would make a correction from here less surprising.”
Corporate reform and Nvidia deals
Despite the bruising losses over the past week, both Samsung and SK Hynix have lifted the index over the past year and a half, with the demand for semiconductors evident in its May trade surplus, with the products accounting for 40 per cent of total exports.
Meanwhile, both have seen their valuations surge past $1 trillion (£742bn), with both groups hyperaware of their growth.
Last month Samsung Electronics swerved a workers’ strike by handing employees bonuses averaging $400,000, while the family behind the tech giant also paid off its 12 trillion KRW inheritance tax bill, extinguishing investor fears that the family could lose control of the company.
The index has also been buoyed by corporate governance reforms and a return to political stability after Yoon’s impeachment after trying to impose martial law in 2024.
He received a life sentence early this year.
Reforms are similar to that of Japan, including modifying the commercial code to benefit shareholders, marking explicit director’s duty towards them.
Nvidia chief executive Jensen Huang also brushed off concerns on Monday, claiming the AI boom is just “beginning” as he announced a series of deals with SK Hynix.
He said: “Everybody should be very excited; they can now buy stock at a cheaper price, and it’s absolutely true that the future of AI is very bright.”
SK Hynix signed a multi-year partnership with Nvidia that will see it commit to developing advanced types of memory for global AI data centres, as the US tech firm spreads into robotics, personal computers and AI supercomputers.
Blip or done for good?
Prior to the tumble, Goldman Sachs argued that “the market is vulnerable to a correction”, off the back of AI known to be a cyclical market, with Korea in particular vulnerable due to its high exposure to the market and lack of diversification.
Neil Wilson, UK investor strategist at Saxo, noted that the movement in Korea is “wrapped up in broader” tech moves, such as the Nasdaq sell-off.
its high concentration leaves it unable to contain widespread damage, unlike the S&P 500 which is more exposed to other parts of the AI supply chain and contains a range of stocks.
Questions over interest rates have also arisen, with economists expecting the Bank of Korea to raise rates by 25 basis points in July.
Ruben Dalfovo, Investment Strategist at Saxo, said: The sell-off in South Korea looks more like a sharp reset than the end of the AI rally, at least for now.
“The Kospi has become highly exposed to the AI and semiconductor story, so when global tech sentiment turns, the index feels it quickly. Samsung Electronics and SK Hynix… have become central to the market’s AI narrative, so weakness in those names can look like weakness in the whole market.
“That said, the move should not be dismissed as a simple blip. After such a strong rally, expectations had become very high, valuations were less forgiving, and foreign investors had less room for disappointment. The market is no longer just asking whether AI demand is real.”
Dalfovo argued this moment is more of a “stress test rather than a full regime change”, as long as demand holds up, but if foreign outflows persist or chip prices weaken a broad correction could be looming.
He said: “In short, the AI story is not dead, but it has been reminded that gravity still exists.”