MW The AI trade is remaking the global stock-market order
By Gordon Gottsegen
The South Korean stock market has gained over 100% year to date, mostly due to two AI-adjacent stocks
A handful of South Korean companies have seen huge stock returns this year, thanks to AI.
The strong performance of AI-related stocks has lifted the U.S. market in recent weeks. The PHLX Semiconductor Index SOX has gained over 70% since the end of March, while individual stocks such as Micron $(MU)$ and Sandisk $(SNDK)$ have more than doubled in that time.
But to truly understand the scale of this AI rally, look no further than South Korea.
The Korea Composite Stock Price Index KR:180721 gained roughly 28.5% in May, which is more than five times the return of the S&P 500's SPX 5.2% gain over the same period. Despite this, the return for the average stock in the Korean index was -10.5% in May, according to BTIG.
That means even though the average Korean stock lost money in May, the overall index saw outsized returns. This is primarily due the two largest companies in South Korea: Samsung Electronics and SK Hynix.
Both companies are major manufacturers of semiconductors and computer hardware, and earnings for those companies have skyrocketed as demand for memory chips explodes. Samsung recently reported a quarterly revenue of 133.9 trillion South Korean won - about $88.4 billion - which represents 43% growth compared to the previous quarter.
This has made the companies prime targets for investors looking to get exposure to the AI trade. Samsung Electronics (KR:005930) has gained roughly 191% year to date, while SK Hynix (KR:000660) is up around 263%.
As share prices for those two companies grow, they overshadow the rest of the Korean stock market.
"Samsung and SK Hynix's combined market cap is more than 50% of the entire market cap of Korea," Wongmo Kang, a senior investment analyst, told MarketWatch.
Kang noted that other sectors of the South Korean stock market, including healthcare and consumer-driven stocks, are down for the year. Despite this, the Kospi is up more than 100% in 2026, driven primarily by the semiconductor rally.
Adding to this, South Korea has a very active demographic of retail investors. These investors have a larger influence on the South Korean stock market than retail investors in the U.S. do. They're also comfortable leaning into risk, favoring leveraged ETFs or taking out debt to trade.
Read: Debt-fueled bets are turbocharging the South Korean stock market as Kospi jumps 8%
Kang, who hails from South Korea, said that the concept of "fear of missing out" (or FOMO) is popular among Korean retail investors. And as Samsung and SK Hynix have rallied over the past few months, Korean retail investors have been eager to chase the momentum.
Chasing the momentum of a stock that has already doubled or tripled in a short amount of time brings risk, but when looking at the earnings of Samsung or SK Hynix, the fundamentals may actually support them.
Korean stocks tend to trade at lower earnings multiples than U.S. stocks, and the same can be said about American versus Korean semiconductor stocks. Kang pointed out that Samsung is trading at a lower forward P/E ratio than Micron, implying that the fundamentals are stronger for the Korean stock.
"If it was a meme stock, I would say it has really high risk. As a seasoned investor, I wouldn't even look at it," Kang said. "But Samsung and [SK] Hynix, their earnings are going crazy."
The earnings growth of these two stocks has not been lost on Wall Street. JPMorgan and Goldman Sachs both recently raised their price targets for the Kospi index.
"This is a turning point for the South Korean market," Kang said.
Other emerging markets are riding the AI wave too
The South Korean stock market was the 11th-largest stock market by market cap at the start of the year. Now it's the fifth-largest, according to Dow Jones Market Data. But it's not the only country moving up the ranks.
The Taiwanese stock market grew from the ninth-largest to the sixth-largest over the past six months. The Taiwan Stock Exchange index TW:Y9999 is up 56.5% year to date.
Like South Korea, the largest company in Taiwan's stock market is another semiconductor manufacturer: Taiwan Semiconductor Manufacturing Co. (TW:2330).
TSMC is also up more than 50% year to date. Meanwhile, MediaTek (TW:2454), another semiconductor company and the second-largest constituent of Taiwan's Taiex, is up about 200% year to date.
Taiwan is a major hub for the semiconductor industry. It's home to numerous chip manufacturers, and many of those companies have seen stock prices soar as a result of the AI trade.
"It's shifting the whole world," Owen Lamont, senior vice president and portfolio manager at Acadian Asset Management, said of the AI trade. "Both the U.S. and outside the U.S. - but especially Taiwan and Korea."
Lamont echoed that emerging markets tend to look cheap compared to U.S. stocks, and that forward P/E ratios actually went down for some of the major semiconductor stocks in Asian markets due to epic earnings growth. But he also pointed out that the same thing happened during the dot-com bubble, when a few companies saw huge earnings growth before the entire market crashed.
He also pointed to the dispersion happening in these markets, when a select few stocks do really well while the rest of the market stumbles. Investors are seeing this happen in the South Korea with Samsung and SK Hynix versus the rest of the market.
"Many of the events of the past few months are bringing me back to 1999," Lamont said. "Anytime you observe something that reminds you of 1999, you've got to be worried."
-Gordon Gottsegen
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 01, 2026 16:55 ET (20:55 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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