AI Boom Tightens Link Between Kospi and Nasdaq 100

“Kospi Has Effectively Become a Semiconductor Index”

Nasdaq 100 Has Also Become More Coupled as AI Hardware Weighting Rises

The AI investment boom is increasingly tying together the fortunes of US technology giants and South Korean chipmakers. As the relationship tightens, concerns are also growing that diversification benefits are weakening and volatility risks are rising.

CNBC, citing data from Leuthold Global Advisors on July 28, reported that the 60-day correlation between the Kospi and the Nasdaq 100 has recently climbed to about 0.50, the highest since 2021.

On July 13, the Kospi fell more than 8% after SK Hynix posted a record one-day drop of 15%. The Nasdaq 100 followed with a 1.88% decline. Micron Technology fell 4% that day, SanDisk dropped 12% and Intel lost 6%.

The pattern repeated on July 24, when the Kospi slid 5.2% and the Nasdaq 100 fell 1.15% as semiconductor shares declined broadly.

It happened again on July 28. Samsung Electronics and SK Hynix each dropped more than 13% in South Korea, sending the Kospi down more than 10%. In morning trading, losses in chip stocks pushed the Nasdaq 100 down more than 1%.

The stronger correlation reflects the growing dominance of Samsung Electronics and SK Hynix in the Kospi. The two stocks now account for more than 50% of the benchmark, effectively turning it into a semiconductor index.

The companies supply about 74% of the world’s dynamic random-access memory, or DRAM. DRAM is a core component in AI servers and sits at the center of the AI hardware supply chain. Samsung and SK Hynix are also major suppliers of memory chips for data centers run by US technology companies, leaving them heavily dependent on capital spending by American hyperscalers.

That has made the South Korean market, home to Samsung Electronics and SK Hynix, a place where US investors focused on AI hardware look for an early read on the strength of the global AI trade.

Rolf Bulk, an analyst at Future Group, told CNBC that data centers accounted for about 40% of global DRAM demand last year, and that share has risen to nearly 50% this year. “The Kospi has effectively become a semiconductor index, and that has increased the correlation between the two markets,” he said.

The AI investment boom started with hyperscalers, with South Korean memory-chip makers benefiting afterward. More recently, the rally has broadened, prompting global investors to treat the Korean market as a leading indicator for wider AI investment trends.

Yoon Jung-in, chief executive officer of Fibonacci Asset Management, said that is because Samsung Electronics and SK Hynix are often the first to show a liquid market response to rapid changes in global AI demand. He added that SK Hynix has emerged as a key signal because of its focus on high-bandwidth memory, or HBM, one of the most important components in the AI supply chain.

At the same time, Korean and US technology stocks are increasingly moving together rather than one market consistently leading the other.

“The performance of US tech shares and Korean tech shares is increasingly being driven by a common factor: sentiment toward AI hardware investment,” Philip Wool, head of research at Leuthold Global Advisors, said.

When AI-related news breaks on a day US markets are closed, moves in Samsung Electronics and SK Hynix can serve as a gauge of how investors may respond once Wall Street reopens. The reverse is also true: when AI news moves US markets, the Nasdaq can signal sentiment for South Korea’s next session.

The close relationship also carries risks. Market participants say the rising correlation between the Kospi and the Nasdaq 100 is eroding the diversification benefits investors have traditionally sought by holding both US and South Korean stocks. Analysts also say volatility in the US semiconductor sector is being amplified as more volatile Korean memory shares, together with inflows into leveraged exchange-traded funds, magnify price swings.

Still, some expect the Nasdaq and South Korean semiconductor shares to diverge over time. Peter Kim, head of global investment strategy at KB Financial Group, said differences in US support for domestic chip production, capital spending and product mix could eventually create a performance gap between Micron and Samsung Electronics or SK Hynix. Micron still trails Samsung Electronics and SK Hynix in memory-market share, including in the most advanced HBM products.

China’s expanding push into the memory-chip market could also become a new risk factor. Chinese technology companies have often started later than global rivals across a range of industries, then caught up faster than expected with state backing and access to technology through multiple channels.

Kim Jung-a, contributing reporter, Hankyung.com, kja@hankyung.com