South Korea’s Market Boom—and the Bubble Beneath It

The South Korean stock market is the world’s best-performing in the first six months of 2026, doubling in value mainly on investors’ perceptions of two companies.

It’s a stunning development in a country where, at this time a year ago, stock values languished as the export-reliant economy confronted the Trump administration’s assault on global trade. South Korea’s market is three times more valuable than it was then.

The country’s two big semiconductor companies, SK hynix Inc. and Samsung Electronics Co., are seeing huge demand for memory chips to build artificial intelligence (AI) infrastructure. SK hynix shares are 10 times more valuable than a year ago, while shares in the larger and more diversified Samsung Electronics are five times more valuable.

The two companies recently joined the small number of firms globally that are worth more than $1 trillion. And on June 24, SK hynix revealed it is preparing an initial public offering (IPO) in the U.S. The company aims to raise around $30 billion, which would be one of the five largest stock issuances by value in American history.

The Warning beneath the Boom
But South Korean investors are also at great risk because the euphoric sentiment driving the rally will end someday. This could shock the broader economy, create political fallout, and damage Koreans’ confidence in stock investing.

The South Korean market fell 66 percent from 1997 to 1998 during the Asian financial crisis. And it fell 55 percent when the U.S. housing bubble burst in 2007, triggering the global financial crisis. Those are the brutal experiences Korean investors should hope to avoid now.

Concentration without Precedent
SK hynix and Samsung Electronics are now so dominant they account for more than half the value of the Korea Composite Stock Price Index, or Kospi, the nation’s benchmark index, comprising about 880 companies.

That is a level of market concentration never seen in the United States and matched in only a handful of cases worldwide. For instance, about 40 percent of the Swiss market is dominated by three companies: Nestlé, Novartis, and Roche. Saudi Aramco, since its listing in 2019, has at times accounted for more than half of the value of companies traded in Saudi Arabia. Two decades ago, Nokia accounted for about two-thirds of the value of the Finnish market.

The closest the U.S. came to such concentration was around 1901, when, shortly after U.S. Steel became a publicly traded company, the steel giant and Standard Oil together briefly accounted for about 15 to 20 percent of the market.

As a result of this concentration, the Korean market has become extremely volatile. On Tuesday, June 23, the Kospi fell 10 percent in a broader sell-off of tech and AI stocks even though, as Barron’s wrote, “There wasn’t one obvious factor driving” the action.

Many foreign investors exited the Korean market in recent weeks, taking profits on gains from earlier in the year. The latest push on prices has come from local investors, some entirely new to investing and many of them apparently using borrowed money.

The Kospi seesawed over the following days, but it had not fully recovered from the swoon by a week later. On June 29, the South Korean government and the companies said they would build new chip plants in the southwest part of the country, for decades the region that has seen the least capital investment. The cost is likely to exceed $500 billion.

The Reform Story and Its Limits
President Lee Jae Myung took office in June 2025 promising to lift the value of the Kospi through reforms in corporate governance. Investor perceptions of Korean stocks have long been tempered by interconnecting, sometimes opaque, cross-holdings among the industrial groups known as chaebol. Those holdings have produced what’s called the “Korea discount”—share prices lower than they might be elsewhere because of value trapped inside chaebol.

Lee last year rewrote part of the nation’s Commercial Act to explicitly require boards of directors to act in shareholders’ interests. Companies were also required to appoint more independent members to their boards, reducing the control that founding families held in chaebol firms. And this March, Lee promised to eliminate the duplicate stock issuances that many Korean firms make, a practice that tends to reduce dividend payouts to shareholders.

Such reforms may have raised investors’ confidence that their rights were being more fully recognized by Korean companies—and, in turn, made them more willing to pay higher prices for Korean stocks.

A Cycle as Old as the Memory Business
But the soaring values of SK hynix and Samsung Electronics obscured those effects. Both stocks have become extreme expressions of a longtime pattern shaped by memory-chip pricing cycles. Ever since U.S. companies dominated memory-chip making in the 1970s, manufacturers have never easily synchronized production with demand, because of the time needed to build new factories.

When chipmaking capacity starts to fall behind demand, manufacturers charge higher prices, and their stock valuations reflect the profits that result. As they add new factories, supply overtakes demand for a time, leading to a plunge in prices, along with declines in chipmakers’ profits and share values.

I began covering South Korea’s electronics companies as a reporter for The Wall Street Journal in 2003, first in Hong Kong and then in Seoul. Even though Samsung Electronics by that time was a leading maker of TVs and a rising player in cellphones, I remember stock analysts teaching me that the company’s stock value mirrored the supply-and-demand cycle of memory chips. For a few years in the early 2010s, smartphone demand and profitability became a bigger influence on Samsung’s stock price. By the middle of the decade, the chip cycle again prevailed as the main influence.

Today, the AI buildout of data centers and server farms has created unprecedented demand for memory chips. The supply-demand balance has become so distorted that memory-chip prices have quadrupled in the past year. In mid-June, when Nvidia CEO Jensen Huang visited the SK hynix booth at a trade show in Taipei, he autographed a wafer with the inscription “Please make more.”

Beyond the financial effects, the astounding demand for memory chips is driving real-world changes in South Korea. They include:

A shift in power and perception between Samsung and SK hynix
Samsung by the late 1990s had won a cutthroat competition within South Korea to become the nation’s largest electronics firm. Following the 1997–98 financial crisis, the Hyundai and LG chaebol were forced to combine their semiconductor companies to form what was then called Hynix. It limped through the 2000s, owned by about 200 creditors, with its fortunes still tied to the cyclical demand for memory chips, then mainly used in personal computers. In 2012, SK Telecom, the then-flagship company of SK Group, bought a controlling interest for about $3 billion and renamed the company. It was the largest corporate takeover South Korea had seen. 

The following year, it worked with the U.S. chipmaker Advanced Micro Devices on a new technique for moving data in and out of memory chips, called high-bandwidth memory (HBM). By the early 2020s, HBM technology had proved especially useful in AI servers, and SK hynix today is responsible for about 60 percent of global output. On June 22, the company surpassed the market value of Samsung Electronics, which had been South Korea’s most valuable firm by far since 2000. This has changed Koreans’ perceptions of the two firms, spawning social-media memes about the newfound status of workers in SK hynix uniforms.

A rush to invest, with borrowed money
A sizable but precisely unknowable portion of the gains in SK hynix and Samsung Electronics shares has come from South Korean individual investors who spied the global boom in AI-related investing and joined in. Huge numbers have borrowed money to do so, which makes the possibility of a crash particularly dangerous for them and for the South Korean economy. 

As of late June, financial regulators in South Korea reported 38 trillion won ($24.7 billion) in outstanding margin loans, up from 27 trillion won ($17.6 billion) at the start of the year. About 9.1 trillion won was associated with purchases of SK hynix and Samsung Electronics shares, the Korea Herald reported. In a feature about South Korea’s investors, The Wall Street Journal in June quoted a 24-year-old woman who planned to give her mother a gold ring to celebrate an anniversary. “She told me to just give her the cash,” to buy stock, the woman told the Journal.

Chipmaker workers flex their muscle and get big rewards
Chipmakers’ demand for workers far exceeds supply, which has led to an unprecedented shift in power. SK hynix last fall agreed to use 10 percent of its operating profits for worker bonuses, and Samsung Electronics agreed to a similar deal in May after its workers threatened to strike. 

The bonuses will be so large—amounting to hundreds of thousands of dollars for workers whose average pay was around $60,000—that the Bank of Korea warned they would add to the nation’s inflation rate. In late June, SK hynix scrapped its requirement that workers hold a college degree, another striking break with tradition in a country that prizes credentials and where more than eight out of ten young adults go to college.

Boom or Bubble?
The rapid rise of South Korea’s stock market is astonishing in many ways. It could mean a new level of prosperity for the country if current expectations about AI’s importance prove justified—and if SK hynix and Samsung Electronics navigate the coming years well.

But the risk that the two companies—and thus the South Korean stock market—are in a bubble is also high. And the bursting of that bubble could prove more damaging to South Korea than to most other places in the world.

Evan Ramstad is a business columnist at the Minnesota Star Tribune. He previously worked for The Wall Street Journal in Seoul, Hong Kong and Dallas, and the Associated Press in New York, Washington and Dallas and briefly at the St. Paul Pioneer Press.