South Korea’s AI Rally Comes with Elevated Volatility

The South Korean market has kept investors on the edge of their seats this year. The Kospi swung from a heavy selloff to a record one-day surge last week, with 30-day volatility now rivalling Bitcoin's.

Samsung and SK Hynix are the two names in the spotlight right now, but after a record start to the year, the market has paused for breath.  Samsung's chip division just delivered a profit up more than 250-fold from a year ago, SK Hynix posted a record quarter with gross margins of 83%, and both are telling customers the memory shortage runs into 2028.

Josh Gilbert, Lead Market Analyst (APAC & ME) at etoro, states that the reason the ride is so wild sits in how the market is built rather than what the companies earn. Korea is the most concentrated major market in the world, with Samsung and SK Hynix dominating the index, and this year it added single-stock leveraged ETFs on those same two names into a market with heavy retail participation. Leverage amplifies everything, on the way down through forced selling, and on the way up too, with one leveraged product tracking SK Hynix pulling in a record inflow of roughly USD$865 million in a single day during the rebound. But investor confidence typically rebuilds more slowly than positions unwind, particularly after periods of elevated leverage.

On the fundamentals, the story has genuinely strengthened. The world's biggest cloud companies all lifted or maintained enormous spending plans this earnings season, with Amazon explicitly saying higher memory prices pushed its capex to around USD$220 billion, and memory makers are locking customers into multiyear contracts, including Samsung's agreement with Broadcom worth more than USD$200 billion through 2030. The risks that matter are lower-moving, whether pricing that has risen this far this fast eventually invites oversupply, and whether Chinese competitors can close the technology gap, a question given fresh urgency by DeepSeek's latest model release, reminding everyone how quickly China iterates.

The AI investment cycle continues to be supported by strong corporate spending on computing infrastructure. Korea's chipmakers sit at the centre of the AI buildout with demand contracted years ahead, but anyone investing in that market should expect continued volatility.