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South Korea’s KOSPI index has become one of the world’s hottest equity markets in 2026, surging from roughly 4,300 at the beginning of the year to nearly 7,850 by May 22.¹ In just over a year, the benchmark has gained more than 230%, breaking through the 5,000, 6,000, 7,000, and even 8,000 levels in rapid succession.¹ The country’s stock market capitalization has now surpassed both the UK and Canada, making South Korea the world’s seventh-largest equity market.¹
At the center of this rally is a single dominant narrative: the AI memory-chip supercycle. Explosive global demand for AI infrastructure has created a severe shortage in high-bandwidth memory (HBM), DRAM, and NAND flash chips. Samsung Electronics and SK Hynix, the two giants dominating Korea’s semiconductor sector, have emerged as key beneficiaries.²
Samsung Electronics reported first-quarter operating profit growth of roughly eight times year-over-year, while profit in its semiconductor division reportedly surged approximately forty-eight times.² SK Hynix posted even more dramatic numbers, with revenue surpassing KRW 50 trillion for the first time and operating margins reaching an extraordinary 72%.² According to TrendForce, DRAM contract prices are expected to rise between 58% and 63% quarter-over-quarter, while NAND flash prices could increase 70% to 75%.² The supply squeeze appears so intense that Samsung and SK Hynix reportedly control 80-90% of global HBM4 capacity, with all 2026 output already sold out.²
This semiconductor boom matters disproportionately because Samsung Electronics and SK Hynix together account for more than 43% of KOSPI’s weighting.³ As their share prices soar, the entire index rises with them. Yet beneath the headline gains, market breadth remains weak. More than 600 of the index’s 800-plus constituents have underperformed the benchmark, while non-tech firms contributed only 4% of earnings growth over the past year.³ This has led some analysts to describe Korea’s market as an “index bull market, individual stock bear market.”³
The rally has also triggered a nationwide trading frenzy.⁴ Retail investors poured approximately KRW 37.7 trillion into domestic equities year-to-date, while margin balances climbed to a record KRW 36.3 trillion.⁴ Brokerage account openings among minors reportedly surged nearly tenfold year-over-year, highlighting the extent of speculative participation.⁴ Some AI-linked stocks are now trading at price-to-earnings multiples above 100 times, prompting concerns that pockets of the market have entered bubble territory.⁵
Paradoxically, foreign investors have been aggressively selling into the rally.⁶ Overseas investors reportedly sold approximately USD 22 billion of Korean equities in May alone, bringing cumulative 2026 outflows close to USD 60 billion.⁶ BlackRock’s iShares MSCI South Korea ETF (EWY) experienced a record USD 9.7 billion weekly outflow during the week of May 9.⁶ Domestic retail traders and local institutions, however, have continued absorbing the selling pressure, creating an unusual divergence between foreign pessimism and domestic enthusiasm.⁶
Volatility has become increasingly extreme. Within a single week in May, Korean markets triggered multiple circuit breakers on both the downside and upside.⁷ These sharp swings have reinforced concerns that the market may be entering a dangerous “melt-up” phase driven by leverage and fear of missing out.⁵
Despite these risks, many global institutions remain bullish. Goldman Sachs raised its 12-month KOSPI target to 9,000, calling Korea its “highest conviction” market in Asia, while JPMorgan and Nomura also sharply increased their forecasts.⁸
Yet even optimistic analysts acknowledge that the market’s dependence on a single sector leaves it vulnerable. If the semiconductor cycle peaks around 2027, or if US and Japanese industrial policies weaken Korean dominance in memory chips, the downside could be severe.⁵
The core debate surrounding KOSPI is therefore straightforward: is this a fundamentally justified AI-driven boom, or the final phase of a leverage-fueled bubble? The answer may depend less on today’s earnings growth, which is undeniably strong, and more on whether the semiconductor supercycle can continue long enough to justify the market’s increasingly speculative behavior.
Disclaimer:
This page is for informational purposes only and does not constitute financial, investment, or other professional advice, nor a solicitation to buy, sell, or hold any digital asset. Trading involves significant risk; leverage can amplify both gains and losses, and you may lose your entire deposited margin. Market data cited herein may not be current at the time of reading. Past performance is not indicative of future results. Views expressed are the author's and do not necessarily reflect those of BingX. BingX and its affiliates accept no liability for any loss arising from reliance on this content, to the fullest extent permitted by law. Please consider your financial situation and risk tolerance before trading.
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Bloomberg, May 6, 2026.
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TrendForce reports
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BNP Paribas
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Securities Times, May 19, 2026; Bloomberg.
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Meridian One Asset Management commentary
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The Kobeissi Letter; CNBC, May 18, 2026; Caixin, May 12, 2026.
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Securities Times; East Money.
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Securities Times, May 19, 2026; KED Global, May 20, 2026; Goldman Sachs.