AI Boom Ties Kospi to Nasdaq 100 as 60-Day Correlation Hits Highest Since 2021

"Kospi Has Effectively Become a Semiconductor Index"

Nasdaq 100 Is Also Moving in Lockstep as AI Hardware Gains Weight

The AI investment boom is increasingly tying the fortunes of US technology giants and South Korean chipmakers. The tighter correlation is also fueling concern that diversification benefits are weakening while volatility risks are rising.

CNBC, citing data from financial information firm Reliant Global Advisors, reported on July 28 that the 60-day correlation between the Kospi and the Nasdaq 100 has climbed to about 0.50, the highest level since 2021.

On July 13, the Kospi fell more than 8% after SK Hynix tumbled 15%, its biggest one-day drop on record. The Nasdaq 100 also slid, ending the session down 1.88%. Micron Technology fell 4% that day, while Sandisk dropped 12% and Intel lost 6%.

The pattern repeated on July 24. The Kospi sank 5.2%, and the Nasdaq 100 fell 1.15% as semiconductor shares declined broadly.

It happened again on July 28. Samsung Electronics and SK Hynix each dropped more than 13% in South Korean trading, pulling the Kospi down more than 10%. The Nasdaq 100 was off more than 1% in morning trading as chip stocks sold off.

The deepening correlation reflects the growing dominance of Samsung Electronics and SK Hynix in the Kospi, with the two stocks accounting for more than 50% of the index. That has effectively turned the Kospi into a semiconductor index.

The two companies supply about 74% of the world's dynamic random-access memory, or DRAM. DRAM is a core component in AI servers and sits at the center of the AI hardware supply chain. Samsung and SK Hynix are major suppliers of memory chips used in data centers run by US technology giants, leaving them heavily dependent on capital spending by American hyperscalers.

That has led US AI hardware investors to watch South Korea's stock market, home to Samsung Electronics and SK Hynix, as an early gauge of strength in the global AI market.

Rolf Bulk, an analyst at Physon Group, told CNBC that data centers accounted for about 40% of global DRAM demand last year. That share has risen to nearly 50% this year. With the Kospi effectively functioning as a semiconductor index, the correlation between the two markets has increased, he said.

The AI investment boom began with hyperscalers, and Korean memory-chip makers followed. But as the rally broadened, global investors began treating the Korean market as a leading indicator for wider AI-related investment trends.

Samsung Electronics and SK Hynix tend to show the fastest and most liquid response to rapid shifts in global AI demand, according to Yoon Jung-in, chief executive officer of Fibonacci Asset Management. Yoon said SK Hynix has emerged as a key barometer because of its focus on high-bandwidth memory, or HBM, one of the most important components in the AI supply chain.

At the same time, Korean and US technology shares increasingly appear to be moving together rather than one market consistently leading the other.

The performance of US and Korean tech stocks is increasingly being driven by the same factor: sentiment toward AI hardware investment, Philip Wool, head of research at Reliant Global Advisors, said.

When AI-related news breaks while US markets are closed, moves in Samsung Electronics and SK Hynix serve as a signal for how investors may react when Wall Street reopens. Likewise, AI-related developments in US markets make the Nasdaq a gauge for sentiment ahead of the next trading day in South Korea.

The close relationship also brings risks. Industry participants say the stronger correlation between the Kospi and the Nasdaq 100 is reducing the diversification benefits investors have traditionally sought by holding both US and South Korean equities. Analysts also say volatility in US semiconductor shares is being amplified as more-volatile Korean memory stocks swing even more sharply on inflows into leveraged exchange-traded funds, or ETFs.

Still, some expect a gap to emerge over time between the US Nasdaq and Korean semiconductor shares. Peter Kim, head of global investment strategy at KB Financial Group, said future earnings could diverge between Micron and Samsung Electronics and SK Hynix because of differences in US support for domestic chip production, capital spending and product mix. Micron still trails Samsung Electronics and SK Hynix in memory market share, including in the latest HBM products.

China's expanding push into the memory-chip market could also become a new risk factor. Chinese technology companies have often started later than global rivals across a range of sectors, but caught up faster than expected through state support and access to technology through multiple channels.

Kim Jung-a, contributing reporter, Hankyung.com, kja@hankyung.com