South Korea stocks rebound as AI spending fears ease

In short: South Korea’s stock market bounced back, led by chip stocks, after investors became less worried that AI spending would hurt profits.

What's going on

South Korea’s KOSPI index has swung sharply in recent weeks because of AI-related stocks, especially big chipmakers Samsung Electronics and SK Hynix. Earlier, the market fell into “bear territory,” which means it dropped a lot from its recent high.

The sell-off was driven by a basic worry: big tech companies were spending huge amounts on AI, but investors were not sure that spending would turn into profits soon. A big flashpoint was reporting that Samsung Group was preparing a plan to spend about 1,000 trillion won over a decade, which added to fears of overspending. During the worst days, the KOSPI saw very large one-day drops, and trading pauses were triggered, like a circuit breaker in a home that flips off when the power load gets too high.

Then sentiment shifted. After heavy selling, buyers returned at lower prices, and chip shares led a strong rebound. In one session, the KOSPI jumped about 8%, with Samsung up about 9% and SK Hynix up about 16%.

Part of the change is that investors now seem to believe AI demand is still real, even if spending grows more slowly. Analysts quoted in recent coverage say the debate has moved from “Will AI investment collapse?” to “How fast will profits grow?”

What to watch

The market may keep swinging because Korea has become a stand-in for AI stocks, and trading in leveraged single-stock ETFs (funds that try to multiply daily moves) can magnify ups and downs. Regulators have already limited new listings of these products and tightened deposit rules. Investors will watch for new spending guidance from big US tech firms and investment plans from Samsung, SK Hynix, and other chipmakers.

Source: NYTimes