The Kospi was until a few months ago an index unknown to the vast majority of small investors, however, something has changed. Since the beginning of the year, this index doubles its market capitalization and leads an explosion that has led to gains of 165% over five years, surpassing the 100% of the Ibex 35, the 78% of the US S&P 500, and the 48% of the EuroStoxx 50, the main European reference. This is the most visible and accessible way for foreigners to participate in the great wealth 'boom' that South Korea is experiencing thanks to being home to two of the three causes of the biggest bottleneck in artificial intelligence today: SK Hynix and Samsung.
Samsung is not soaring in the stock market thanks to its much more famous televisions or mobile phones, but to the chips it manufactures, specifically the memory cards. This component, crucial for the chips that enable AI to function, is almost exclusively manufactured by these two companies and the American Micron. Considered low-end chips, memories were a minor element until the massive demand for data center chips and technological advancements revolutionized the sector and the economy of the entire country. Thus, these two companies already represent more than half of all Kospi, also driven by the reforms of the South Korean government to encourage local participation.
In the style of the US tech companies dubbed 'the magnificent seven', Samsung and SK Hynix have risen by over 570% and 250%, respectively, since the beginning of the year. For an index that doubles its market capitalization in 2026, if these two chip manufacturers were excluded from the equation, Kospi's gains would be limited to a (not modest) 30%. The exponential rise of these two semiconductor giants is such that their weight within the emerging markets index reaches 13%; that is, more than a tenth of all stock exchanges in developing economies in the world have their own names: Samsung and Hynix.
The FOMO (fear of missing out, according to its English acronym) is such that two leveraged ETFs linked to each of these companies have reached all-time highs globally, not only due to massive capital inflows from investors but also due to market appreciation. In the last week of May, these funds increased their market capitalization by 38%, reaching 7.2 trillion Korean won, about 4,000 million euros; a historic feat for an ETF that only replicates a listed company.
Such a steep vertical rise has raised alarms among analysts and investment funds about the consequences of such a high concentration in just a few values for the South Korean stock market. Global investors, who hold about 40% of the country's stock market, have divested nearly $60 billion since January 1, according to figures compiled by Bloomberg, mainly concentrated in May (with over $20 billion in net sales - once purchases are deducted -) and in March (when another $25 billion left). Now there is concern that the gap left by large investment funds is being filled by South Korean citizens, as reflected in the data.
The biggest boost that the small investors in the Asian country have received comes from their own government. Just a year ago, the government led by Lee Jae-Myung set out to end what is known as the 'Korea discount', which refers to how South Korean companies, listed on the Kospi, such as Samsung Electronics or the world's third-largest automaker, Hyundai Motor Group, are valued lower than their Japanese or Taiwanese counterparts because it is understood that international investors apply a "discount" due to the proximity to the authoritarian regime of North Korea or because the corporate structure is dominated by large family clans, something that the government is now also seeking to diversify.
To achieve this, the country's government has approved various regulations aimed at stricter corporate governance control and tax exemptions for the purchase of equities by its citizens. Various analysis firms view with concern the high participation of citizens, especially in a country where leveraged products are very popular, which means that those who invest through them can not only lose all the money invested but also double or triple it by committing to assume additional losses of 200% or 300% if the stock market falls by 100%. In bullish times, this practice works in their favor as it doubles or triples the gains obtained in the stock market.
Thus, the concentration of the index is observed cautiously where everyone wonders how long the boom can last. Memories are known for being a cyclical business. Manufacturers go through periods of extreme prosperity followed by major crises. Therefore, despite the high demand, neither Samsung nor SK Hynix have rushed to expand their factories and only seem willing now, when the main investment banks predict that the shortage of DRAM will extend until mid-2028, as indicated this same week by Goldman Sachs, which at the same time predicts a 20% growth in demand or in other words, a price explosion.
In just the first quarter, Samsung recorded an operating profit of 57.2 trillion won (over 30,000 million euros), almost triple that of the previous year, and SK Hynix multiplied it by five to 37 trillion (21,000 million euros), and their distribution among shareholders and staff has been tense, especially at Samsung where a 14-day strike was on the table.
The solution of the South Korean company has been to distribute a bonus of $300,000 among its staff, while in its rival SK Hynix, accustomed to distributing 10% of its operating profit among employees, the figure escalates to $400,000, turning its employees into the new rich of the country, similar to how Nvidia has become a mine of millionaires thanks to its stock payments. This wealth reaches the entire Korean economy, which has seen sales of luxury products in regions near the factories skyrocket, but also has another clear beneficiary: the government.
The tremendous profits of these companies are boosting the revenue forecasts of the public treasury. In a recent appearance, the country's economy minister acknowledged that from tax revenues around 340 (190,000 million euros) and 370 trillion won (200,000 million), the country would reach 415 trillion (230,000) this 2026, a figure that some analysts raise to 500 trillion (280,000) if both companies meet expectations. A surplus for the Korean accounts that the country is vigorously debating how to channel, and part of it will be allocated to creating a new sovereign fund in the style of Norway or Arab countries, showing that chips have become the new oil.