South Korea’s main stock index, the KOSPI, is leaving its competitors in the dust thanks to a surge of retail investors and the global AI boom. The index has tripled in value in less than 18 months, six months faster than it took the Nasdaq to do so at the height of the dot-com bubble. Earlier this month, the KOSPI crossed the 8,000-point mark for the first time, driven by investor enthusiasm for companies linked to artificial intelligence and semiconductor manufacturing, after starting last year at 2,401 points.
The rally in the Korean index is reminiscent of the Nasdaq’s performance during the peak of the dot-com era in the late 1990s, when the technology-focused index tripled in value within two years, from 1,574 points in early 1998 to 5,132 points before the bubble burst. However, analysts argue that the current Korean rally is more fundamentally grounded than the speculative frenzy of the dot-com era. “The difference this time is that the dot-com boom was driven primarily by expanding valuation multiples, while the current wave has so far been driven largely by earnings growth,” Cameron Chui of JPMorgan told the Financial Times.
Analysts at Goldman Sachs estimate that the index could rise to 9,000 points next year. “Korea is our highest-conviction investment position,” said Timothy Moe, Goldman Sachs’ chief equity strategist for Asia-Pacific. “Our earnings growth forecast for this year, at 300%, is the strongest we have ever seen in any Asian market, except during the 1999 rebound from the Asian financial crisis, when profits had effectively been wiped out beforehand.”
Similarly, JPMorgan raised its target for Korean equities twice in less than a month, citing improvements in the semiconductor cycle, corporate governance reforms, and growth in industrial sectors. For the first time, the bank lifted its KOSPI target to 9,000 points from 7,000 in a forecast published in late April, and only weeks later raised it again, this time to 10,000 points.
The strength of the South Korean stock market is particularly striking given the turbulence experienced by many other Asian capital markets since the outbreak of the war with Iran in late February. While the KOSPI climbed above pre-war levels, stock markets in Indonesia and the Philippines remained below where they stood before the conflict began.
The rally, which began accelerating in 2025, has been led by two of Korea’s largest public companies: Samsung and SK Hynix, both of which are benefiting from soaring demand for memory chips used in AI applications. “Korea is enjoying a supercycle in the memory-chip market, where an unprecedented supply shortage, combined with rising demand from hyperscalers such as Amazon and Google and AI-driven computing, is pushing chip prices higher,” Goldman Sachs analysts explained. “Because memory-chip manufacturers operate with high operating leverage, these price increases translate into extraordinary bottom-line growth.”
Samsung shares have climbed more than 130% since the beginning of the year and last week rebounded after a strike by production workers was narrowly avoided, while SK Hynix shares have surged nearly 170%. The combined market value of the two companies is now close to $2 trillion, exceeding South Korea’s estimated GDP of $1.93 trillion, according to the International Monetary Fund.
This concentration has raised concerns among some analysts. “Apart from these two stocks, the rest of the market has not performed particularly well, while value stocks are actually underperforming as technology shares absorb most of the market liquidity,” said the chief investment officer at Korean asset management firm Tcha Partners.
However, analysts at JPMorgan remain optimistic about the concentration risk and believe the positive momentum in the chip sector will continue. They argue that the imbalance between supply and demand in the memory-chip market is expected to widen further next year, with customers already placing advance orders for 2027 out of concern over shortages. Even excluding Samsung and SK Hynix, JPMorgan estimates that KOSPI returns remain strong enough to outperform other regional benchmark indices. The bank also highlighted banking, defense, electrical equipment, robotics, aerospace, and shipping as additional sectors supporting the market beyond semiconductors.
Another factor driving the rally is the return of local retail investors, who in recent years preferred to invest in the United States. According to Goldman Sachs estimates, retail investors purchased $14.1 billion worth of Korean equities in a single week in May. The flood of retail money into the market, investors nicknamed “ants” in South Korea, has also pushed volatility in Korean stocks to its highest level since the global financial crisis. “It feels like the period when real estate prices were soaring,” Seo Han, a resident of Sejong City, told the Financial Times. “In 2021, when housing prices in Seoul skyrocketed, people who took out loans to buy homes suddenly became rich, while those who continued renting were left behind.”
Yet while domestic investors are returning, international investors appear to be pulling back. Just two weeks ago, foreign investors sold $13.2 billion worth of Korean equities. The outflows created sharp volatility in the market and even led to a temporary trading halt. Citigroup consequently described the Korean market as being in a more extreme overbought condition than the U.S. market and reduced its exposure. “Although, in our assessment, financial tightening is still at too early a stage to trigger a sharp correction or the end of the bull market, the KOSPI appears significantly more overbought than U.S. equities, and caution suggests taking profits on part of our position,” Citigroup strategists wrote.
Nevertheless, the broader consensus among major banks and traders is that the KOSPI still has room to rise this year. According to analyst Lee Kyung-min of Daishin Securities, if a ceasefire agreement is reached between Iran and the United States that ensures the reopening of the Strait of Hormuz, oil prices could fall below $80 per barrel, helping stabilize bond yields and the dollar while restoring risk appetite in global capital markets. In such an environment, he argued, the KOSPI could post further gains in the second half of the year.
A similar view was expressed by analysts at NH Investment & Securities, who estimate that the index could climb to 9,000 points. Kim Byung-yeon, head of the firm’s strategy division, explained: “Although interest rates and risk premiums have risen due to the effects of the war, companies’ profit forecasts are increasing at an even faster pace.” Moreover, he added, “even after the war, core inflation remained more stable than expected, reassuring investors and allowing the KOSPI to continue climbing.”