Korean Stocks Rebound as Chipmakers Gain on Artificial Intelligence Revival

South Korean Stocks Recover from Iran War-Induced Slide

South Korean stocks have made a significant comeback, propelled by a rally in chipmakers as escalating US-Iran tensions bring the artificial intelligence trade back into investor focus. The Kospi, South Korea's benchmark stock index, climbed as much as 1.2% on Monday to surpass 6,200, with memory firms Samsung Electronics Co. and SK Hynix Inc. leading the charge. This sharp turnaround marks a notable reversal from the early days of the Middle East conflict, when surging oil prices triggered a historic selloff in the energy import-dependent market and pushed it to the brink of a bear market.

The Kospi's nearly 50% year-to-date gain has made it one of the world's best-performing equity markets. Furthermore, Goldman Sachs has lifted its Kospi target to 8,000, citing fundamental improvements across semiconductor and industrials. This optimism is driven by the sector's resilience to episodic geopolitical or energy shocks, with South Korea's equity market fundamentally driven by global semiconductors and investment in power infrastructure and defense.

The semiconductor sector has been a key driver of the Kospi's recovery, with SK Hynix shares jumping as much as 3.4% on Korea Exchange ahead of its earnings this week. The company has begun production on a next-generation memory module designed for Nvidia's Vera Rubin platform and plans to closely collaborate with Nvidia to solve bottlenecks in AI infrastructure and provide optimal performance. Samsung Electronics' results earlier this month provided some reassurance for investors, with the chipmaker posting an eightfold jump in quarterly profit, underscoring robust demand and allaying concerns that the US-Iran conflict would dent spending on AI hardware.

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Comparison of Quarterly Profit Growth

Growth in other regions has been significantly weaker, with Korea and Taiwan benefiting from strong earnings momentum in their technology sectors. Jarrid Klug, senior equity portfolio manager at DWS Group, notes that the robust demand for AI hardware has driven the sector's recovery. With the global AI and power-related capital expenditure remaining robust, Korean equities are expected to stay well-supported into year-end, according to Gary Tan, a fund manager at Allspring Global Investments.