Currency traders keep a close eye on exchange rates while the Korean Standard Stock Price Index (KOSPI) is shown on a screen in Hana Bank’s main branch in Seoul, as of June 23, 2026.
The KOSPI, known globally as a major stock index, has recently dipped into bearish territory, reflecting investors’ hesitance towards artificial intelligence initiatives and revealing risks tied to market concentration.
This index saw a decline of over 5% on Wednesday, settling around 20% lower than its peak recorded on June 19, based on data from LSEG. A slight uptick was noted on Thursday amid fluctuating trade.
“The drawdown in South Korea is largely influenced by increasing skepticism around AI from global investors, alongside the market’s heavy concentration,” mentioned Manishi Raichaudhuri, CEO of Emer Capital.
The rapid change underscores a key aspect of this year’s market behavior: South Korea’s significant reliance on AI trade. As of June, semiconductor giants Samsung Electronics and SK Hynix represented more than half of the KOSPI’s weight, according to Emer Capital’s data. This heavy reliance has resulted in pronounced fluctuations in the index.
John Ying Yun, founder of Fibonacci Asset Management Global, explained, “This correction is more about market positioning than any real deterioration in the underlying fundamentals.” He added that Korean stocks experienced a robust rally, making them some of the most popular AI investments globally, so profit-taking didn’t take long to kick in.
Ying noted that the KOSPI’s drop can be viewed as a “healthy reset” and not a fundamental shift in outlook, although rising global uncertainties and hesitations around profit growth are making investors wary.
Peter Kim, head of research at KB Securities, also pointed out that these changes signify broader shifts in market dynamics.
“The gamification of finance is leading to these fluctuations spurred by news and trends rather than actual fundamentals,” he stated, emphasizing that swings of 5% to 10% are increasingly seen, driven by retail investment, ETF leverage, and AI-related concentration. The KOSPI volatility index has surged over 200% since the year’s start.
Adjustment of appraisal value
Despite the KOSPI’s recent struggles, companies at the center of the selloff reported strong earnings. For instance, Samsung’s memory prices have been rising significantly. However, there are concerns surrounding AI investments that have caused a dip in its shares.
“The market seems to have more doubts about profit growth rates than the demand for AI itself,” noted Jung from Fibonacci. “This distinction is crucial, as it points towards a correction in valuations rather than a culmination of the AI cycle.”
Memory prices saw a rise of 50% to 80% in the second quarter and are projected to increase further in the latter half of the year, according to Rolf Balck, head of semiconductors and infrastructure at Futuram Group.
Balck added that the fundamentals for memory makers remain robust, citing prolonged supply deficits and long-term contracts with major customers. Kim from KB Securities concurred, saying, “This correction could provide a good opportunity for those willing to withstand the short-term turbulence given the solid fundamentals and positive earnings outlook.”
The KOSPI jumped over 75% last year and has risen by more than 70% this year.
“While we may see more short-term volatility, the medium-term outlook appears positive,” Jung remarked. “Once global risk sentiments steady, foreign investors might reinvest in South Korea due to its pivotal role in the global AI supply chain.”
Nevertheless, predicting when the Korean stock market will recover remains challenging, as it hinges on broader global conditions.
Baruch suggested that SK Hynix’s U.S. listing on Friday could offer a temporary uplift for memory stocks, especially if management offers positive remarks about the memory cycle for the latter half of 2026, which could benefit the KOSPI as a whole.
“Results from SK Hynix and Samsung Electronics for the second quarter of 2026, to be revealed later this month, might further uplift sentiments. Encouraging outlooks from both firms regarding their business sustainability could support their stocks and enhance the overall market dynamics.”
