South Korea becomes world's sixth-largest stock market as AI rally lifts valuation to $5 trillion: Report

South Korea’s stock market has become the world’s sixth-largest, with a total valuation of $5 trillion, driven by a surge in artificial intelligence-linked semiconductor stocks. This year alone, the market added nearly $2.3 trillion in value, propelled by soaring demand for advanced memory chips used in AI systems. Semiconductor giants Samsung Electronics and SK Hynix have led the rally, each crossing the $1 trillion valuation mark, pushing South Korea’s Kospi Index to record highs. The AI boom has reshaped global capital flows, benefiting South Korea and Taiwan as key suppliers of hardware for generative AI models and data centers. Samsung and SK Hynix dominate the global market for high-bandwidth memory (HBM) chips, a critical component in AI accelerators like those produced by Nvidia. This technological leadership has attracted billions in investment, reinforcing South Korea’s position in the global AI supply chain. Market momentum has also been supported by governance reforms under President Lee Jae Myung, aimed at narrowing the ‘Korea discount’—the long-standing undervaluation of South Korean stocks. These efforts have improved investor sentiment and drawn fresh capital into the market, with Wall Street strategists projecting further gains for the Kospi despite its strong performance. However, economic challenges persist. Consumer inflation rose to 3.1% in May, the fastest pace in over two years, fueled by rising energy costs tied to West Asia tensions. Petroleum prices climbed 24.2% year-over-year, while international airfares surged 33.5%. The Bank of Korea is expected to raise interest rates as early as July to combat inflation and stabilize the won. Despite these headwinds, investors remain confident in South Korea’s role as a critical player in the AI-driven economy. The sustained demand for advanced semiconductors continues to drive earnings growth for technology leaders, cementing the country’s status as a major beneficiary of the AI revolution.