Buffett’s ‘Gravity’ Rule Falters as Kospi Jumps 94%, Best Gain Among Major Markets

South Korean stocks up 94% this year, versus Taiwan’s 50%

AI-led rally shrugs off higher rates

In the age of ‘megaforces,’ stocks keep climbing despite rising yields

AI is driving a sweeping structural shift

Rising rates reflect growth, not just tightening

Tech innovation is making markets more resilient to high rates

South Korea’s Kospi has surged 94.2% this year through May 28, the biggest gain among major global markets. Stocks have continued to climb despite a weak currency, high inflation and rising market interest rates. The rally is not limited to South Korea. Equities in the US, Japan and Taiwan have also advanced. What those markets share is powerful industrial momentum centered on artificial intelligence. AI investment and the productivity gains that follow are challenging Warren Buffett’s maxim that interest rates act as gravity on stock prices.

AI-Led Boom in the Age of ‘Megaforces’

A Korea Economic Daily review of benchmark indexes in major markets found on May 29 that the Kospi had risen 94.2% since the start of the year, the strongest performance among them. Taiwan’s Taiex climbed 50.6% and Japan’s Nikkei 225 gained 28.5%. Egypt’s EGX30 rose 25.8%, Turkey’s BIST 100 advanced 21.3%, and the S&P 500 added 10.5%.

The stock-market rally is also pushing up growth forecasts. Taiwan’s government recently raised its gross domestic product growth forecast to 7.7% from 3.5%. The International Monetary Fund expects the US economy to grow 2.3% this year despite headwinds including higher oil prices tied to the Middle East war.

Not every economic indicator is pointing higher. The US consumer price index rose 3.8% in April from a year earlier, the biggest increase in three years. Market rates, which directly affect mortgage lending and corporate funding costs, are also rising sharply. Japan’s 10-year government bond yield stood at about 1.6% in October 2025, when Prime Minister Sanae Takaichi took office, and has since climbed to 2.8%. Governments around the world are also on edge as the dollar strengthens after the war in the Middle East.

Why, then, are stocks still booming? Experts point to structural change unleashed by AI investment. Google, Microsoft, Amazon and Meta are pouring $674 billion this year alone into AI infrastructure. That figure is projected to swell to $1.6 trillion by 2031. The spending is creating a virtuous cycle across the broader AI supply chain. BlackRock said the influence of traditional macro indicators such as interest rates and inflation is weakening, while the “megaforce” of technological innovation is increasingly dominating markets.

AI Investment Is Raising the ‘Neutral’ Rate

Rising market rates are not necessarily a negative, according to the prevailing view. Instead, they reflect healthy funding demand tied to large-scale AI investment.

Big Tech bond issuance has picked up in recent months. Meta sold $25 billion of corporate bonds in April. Amazon also completed $36.9 billion of bond sales in March, including long-term debt issued at yields in the 6% range. Joseph Amato, chief investment officer at Neuberger Berman, said rate increases once signaled monetary tightening, but are now being read as an “explosion in productive capital demand” driven by the shift to AI. Current high rates suggest the economy’s real neutral rate has structurally moved higher, he added.

Another factor behind the global stock rally is that long-dated government bonds, once favored by institutional investors, have become less attractive. The term premium, or the extra compensation investors receive for holding 10-year Treasuries instead of short-term US government debt, has fallen from 3% to 5% in the past to the high-0% range recently. BlackRock said the term premium, now near historical lows, could rise.

Some investors are also warning that stock markets may be overheating. The Wall Street Journal recently reported that the S&P 500 equity risk premium, which measures the index’s expected excess return over 10-year Treasuries, has traded in a range of 0 to 1 percentage point this year. That suggests investors may be better off holding bonds than taking on equity risk.

Hwang Jung-soo, Korea Economic Daily reporter