South Korea's KOSPI Roars Back Into Bull Market as AI Chip Frenzy Returns

A Stunning Reversal After July's Historic Crash

South Korean stocks are back in a technical bull market, just two weeks after a brutal selloff. On Thursday, August 13, South Korea's benchmark KOSPI closed 4% higher, leaving it 22% above its July 30 closing low and meeting the widely used definition of a technical bull market. The speed of this recovery has left many market watchers stunned — and asking how long it can last.

The KOSPI index had plunged about 40% from its June 22 peak to its July 30 trough, as a selloff in index heavyweights Samsung Electronics and SK Hynix amplified losses. The July selloff also produced frequent trading halts, as intraday swings of more than 5% became commonplace. It was the kind of volatility that shakes even seasoned investors — yet the rebound has been just as dramatic as the collapse.

Chips and AI Are Driving the Comeback

Investor appetite for technology hardware stocks is returning as the latest earnings from global tech giants point to continued heavy spending on artificial intelligence. The latest leg of the KOSPI's rebound has been fueled by renewed optimism over AI spending, helping revive interest in South Korea's heavyweight semiconductor stocks. "The AI spending boom is far from over," said David Morrison, senior market analyst at Trade Nation, pointing to strong results from U.S. AI-related companies. Supermicro and cloud provider CoreWeave surged following better-than-expected results.

Samsung and SK Hynix drove much of July's rout, accounting for 71% of the KOSPI's losses. Together, they fell 48%, compared with 26% for the rest of the market, according to Macquarie's analysis. Now those same stocks are leading the charge back. On Thursday, Samsung Electronics and SK Hynix closed 5% and 6% higher, respectively, as optimism over AI-driven memory demand lifted chip stocks. An in-line U.S. inflation reading also reduced expectations for a September Federal Reserve rate hike, further supporting risk appetite, while the South Korean government's plan to ease regulations for semiconductor and AI megaprojects — expected to generate KRW 4.2 trillion in investment — provided an additional positive backdrop.

Asia's Mixed Picture: Japan Rises, China Stumbles

Japan's Nikkei 225 added 1.5%, and the Topix advanced 0.99% on Thursday, riding the broader regional wave of tech optimism. China, however, told a different story. The KOSPI's recovery comes as other major Asian markets struggle to find direction. Japan's Nikkei has been choppy, Chinese tech stocks remain under regulatory pressure, and Taiwan's market faces its own valuation concerns despite TSMC's strength. The divergence underscores how differently AI enthusiasm is playing out across the region.

Korean equities are suddenly looking like a relative value play for investors seeking semiconductor exposure without some of the political baggage attached to Chinese alternatives. That framing has attracted renewed foreign interest. Foreign investors were net buyers of South Korean stocks, helping the index overcome more than a 20% pullback from July's lows and move into technical bull-market mode.

Can the Rally Hold?

The KOSPI's dependence on just a handful of semiconductor companies makes its bull run overly exposed to shifts in sentiment toward AI. "Korea's equity market is basically synonymous with the AI hardware trade at this point," said Phillip Wool, head of research at Rayliant Global Advisors. Macquarie went further, warning: "We are facing the worst memory crunch in history and see no signs of supply constraints easing within the next three years." The firm said AI inference-driven demand is "off the charts," requiring huge amounts of memory even as supply remains constrained and slow to respond.

Wool cautioned that "anything that calls this narrative into question — whether it's soft guidance on capex from hyperscalers, sagging token pricing, or Fed tightening fears — we can expect to see a pullback." Both Samsung and SK Hynix will need to deliver results that justify current valuations, particularly as memory pricing remains under pressure in segments outside AI. For now, though, the bulls are firmly back in Seoul — and the world is watching to see whether this remarkable rebound has staying power.