AI-Driven Stocks Fuel Surge in Seoul's Kospi Index Beyond 8,000

South Korea's Kospi Index Surpasses 8,000 Points as Semiconductor Industry Booms

South Korea's benchmark Kospi index reached a new milestone on Friday, briefly surpassing 8,000 points for the first time, driven by a surge in demand for artificial intelligence-driven semiconductors. The index rose above the milestone in morning trade before falling back into the 7,900 range later in the session.

The Kospi has experienced a meteoric rise over the past year, with the index trading at around 2,600 points just 12 months ago. This significant increase is largely attributed to the growth of South Korea's semiconductor industry, which is home to tech giants Samsung Electronics and SK hynix. Both firms are key suppliers of high-performance chips that power AI infrastructure globally, and have posted record first-quarter earnings as demand surges for the fast-evolving technology worldwide.

The companies' shares have also seen significant gains, with Samsung Electronics rising around 190 percent over six months, and SK hynix gaining 220 percent over the same period. The global frenzy to build AI data centres has sent orders for the companies' advanced, high-bandwidth memory microchips soaring.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

South Korea has said it will triple spending on AI this year, aiming to join the United States and China as one of the top three AI powers. Despite the optimistic outlook, analysts caution that there is no guarantee that the same level of AI demand will continue in coming years.

The uncertainty surrounding future demand for AI data centres is reflected in the views of business and economics professors. Lee Jae-won, an analyst at Yuanta Securities in Seoul, believes that the Kospi is likely to maintain its upward trend for the time being. However, Kim Dae-jong, a business professor at Sejong University, notes that demand for AI data centres is arguably uncertain beyond the next two years.

Seok Byoung-hoon, an economics professor at Ewha Womans University, is also cautious, stating that it is unclear whether expectations for future earnings have already been priced into current share prices or whether they can continue to drive stocks higher. The uncertainty surrounding the semiconductor industry's future prospects has not dampened investor sentiment, with AI-related shares also rallying on Wall Street overnight.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline