South Korean Stocks Overtake Germany and France as AI Boom Drives KOSPI to Record

Investors are reassessing Asian equity exposure as doubts grow over whether massive spending on artificial intelligence will generate returns quickly enough to justify elevated technology valuations. Taiwan is regaining attention because its market offers a broad AI supply-chain ecosystem spanning semiconductor foundries, server assembly and critical components, giving global funds exposure to both infrastructure demand and established manufacturing earnings.

Foreign investors recorded net purchases of Taiwan shares for a second consecutive trading day, helping lift the benchmark’s year-to-date gain to 54%. That pushed Taiwan’s annual advance above South Korea’s Kospi for the first time this year. The shift suggests overseas funds are favoring Taiwan’s supply-chain depth and earnings visibility as scrutiny of AI capital expenditure and its eventual payoff intensifies.

The expansion of AI data centers has fueled memory-chip demand, making Samsung Electronics and SK Hynix the main engines of South Korea's stock market. Together, the companies account for 54% of the KOSPI's market capitalization and nearly three-quarters of its gains this year. That has left South Korea's $4.9 trillion stock market highly concentrated, with both the index and leveraged retail-investor positions at risk if AI capital spending cools.

As of June 4, 2026, the KOSPI had risen more than 100% for the year, but it plunged as much as 7% intraday on June 5. Foreign investors have sold a net 15.8 trillion won since the start of June. The Korea Financial Investment Association said margin-financing balances hit a record 38 trillion won on May 29. Although Goldman Sachs raised its index target to 12,000 from 9,000, the market still faces a liquidity test from a potential Bank of Korea interest-rate increase in July.

Generative AI has fueled demand for high-bandwidth memory (HBM) and server chips, putting Samsung Electronics and SK Hynix at the center of the global AI supply chain. Hedge funds are bullish on South Korea’s leadership in the memory market, betting that AI investment can continue to generate steady cash flow. Semiconductor stocks have consequently become the main engine driving South Korean equities higher.

Since the start of 2026, shares of Samsung Electronics and SK Hynix have risen 128% and 188%, respectively, helping the KOSPI surge about 80% and break above 8,000 for the first time. As South Korean retail investors chase the rally, margin-financing balances have climbed to 36 trillion won, boosting brokerage interest income while underscoring growing leverage and the rising risk of buying at elevated prices.