The combined market value of South Korea's two highest-valued companies is poised to surpass that of China's two internet giants for the first time, highlighting how the evolving global artificial intelligence frenzy is reshaping the investment landscape for Asian tech stocks. During Tuesday's trading session, the combined market capitalization of Samsung Electronics and SK Hynix reached $1.11 trillion, slightly exceeding that of Alibaba and Tencent, the two largest Chinese tech firms listed in Hong Kong. This milestone signifies that the investment boom in AI has pivoted towards infrastructure development, greatly benefiting South Korean chipmakers who are at the core of the industry's supply chain. Given that Alibaba and Tencent have long been seen as symbols of Asia's tech ascendancy, yet are still in the early stages of engaging with AI, the South Korean chipmakers have now eclipsed them in prominence.
This shift in market cap rankings also underscores the divergent development paths taken by these two Asian nations. South Korea has positioned itself as a crucial supplier to global industry leaders like NVIDIA, while China has focused more on achieving technological self-sufficiency. "South Korea is really focused on a specific part of the technology supply chain, whereas China is more committed to building a complete, end-to-end AI technology stack," said Yiping Liao, a portfolio manager at Franklin Templeton Global Investment. "The reason for such a stunning rally in Hynix and Samsung shares appears to be that we are in an unprecedented cycle of memory demand."
Year-to-date, Samsung Electronics' stock has surged by 34%, while SK Hynix's share price has soared approximately 37%. In contrast, Alibaba's Hong Kong-listed shares have risen about 14%, while Tencent's stock has remained largely flat for the year. The two Korean companies are thriving due to their leadership in the most advanced High Bandwidth Memory (HBM) chips, which power AI accelerators from companies like NVIDIA, and are benefiting from demand from hyperscale data centers willing to pay a premium. Record shortages in DRAM and NAND flash have further granted them unprecedented pricing power.
"Memory chips have become a key strategic asset for large US tech companies, which is a stark contrast to the past when memory was merely a consumable component for PCs and smartphones," stated Simon Woo, Head of Korea Research at Bank of America Global Research's Seoul branch. He predicts the memory super cycle will persist until 2027. This transformation has elevated the importance of the memory industry. Timothy Moe, Chief Asia Pacific Equity Strategist at Goldman Sachs, estimates that the semiconductor sector will account for approximately 60% of the expected earnings growth for South Korean stocks this year.
In sharp contrast to South Korea's dominance in the global AI arena, China's vision for the sector is increasingly leaning towards domestic substitution due to restricted access to advanced chips caused by US export controls. Even within China, a clear divergence is evident, with the recent wave of local tech prosperity primarily being led by AI chip design firms. Newly listed local GPU designers like Moore Threads Technology Co.,Ltd. (688795.SH) and Metax Integrated Circuits (Shanghai) Co., Ltd. (688802.SH) achieved remarkable performances on their Shanghai debut days. However, startups focused on building large language models to rival OpenAI have lagged somewhat. While both Alibaba and Tencent are also venturing into the AI industry, their focus remains on developing models that serve their core businesses.
To be sure, the South Korean chipmakers' heavy reliance on the supply-demand cycles for memory chips carries risks, whereas the Chinese internet giants' strengths in applications could offer more stable long-term growth. Some observers believe the AI field is vast enough for investors to find opportunities from different angles. Indrani De, Head of Global Investment Research at FTSE Russell, noted that China's advantage lies in its vast manufacturing ecosystem, allowing for rapid scaling, while South Korea's focus on hardware represents a structural advantage that is difficult to imagine changing in the short term.
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