South Korean Market Soars to Record High Amid AI-Fueled Tech Surge, Despite Global Tensions

Market Rally Continues as Investors Flock to AI Sector

Investor optimism surrounding the potential conclusion of the Iran war was evident on Tuesday, as the return of the AI trade propelled South Korean stocks to a record high and fueled a rally in Taiwan. The Kospi Index, Korea's tech-heavy gauge, surged as much as 2.3% to an all-time intraday high, erasing losses driven by the Middle East conflict in the previous session.

Samsung Electronics Co. and SK Hynix Inc. led the advance, with shares of Samsung trading at 5.6 times forward earnings and SK Hynix at 4.8 times. These ratios compare with 22 for a benchmark US chip stock gauge. The strong gains in the two tech-heavy Asian markets are a testament to investors' willingness to focus on the AI sector's favorable dynamics, such as tight chip supply.

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The Kospi has rallied over 50% this year, making it one of the world's top performers. This puts Korea on track to overtake the UK in market capitalization, following Taiwan's lead. Goldman Sachs has lifted its Kospi target to 8,000, while JPMorgan Chase & Co. strategists, including Mixo Das, have raised their "bull case" Kospi target to 8,500 in a note dated Friday.

Foreign and local funds were net buyers of Kospi members on Tuesday, while Korean retail investors were net sellers. This shift in investor sentiment is a result of fundamental improvements across industries, including semiconductors. As markets move on from war headlines to earnings and AI demand, the tech theme has regained its spotlight, with investors rebuilding conviction to "buy on the way up."