A man looks at a stock index board showing the Korean Standard Stock Price Index (KOSPI) after the close of trading in Seoul, July 28, 2026.
Greg Baker AFP | Getty Images
South Korea’s Kospi has reversed recent losses and returned to bull market territory as investors flocked to the country’s semiconductor giant, which dominates the index.
Last month, the benchmark rose more than 20% from its July lows, a commonly used metric for bull markets, after a partial selloff driven by leveraged positions and forced selling pushed the benchmark into bear market territory.
The speed of the reversal highlights the high volatility of tech stocks and raises the larger question of how long South Korea’s stock rally will last.
For bulls, the answer will largely depend on whether the fundamentals behind the South Korean semiconductor giant can keep up with increasingly optimistic expectations. Strong US technology revenues and continued commitment to AI infrastructure investment have rekindled confidence that demand for memory chips will remain strong.
“The rise in AI and continued strong returns are consistent even in downturns, and it is the fundamentals that bring the market back to normal, not the other way around,” said Peter Kim, head of global investment strategy at KB Securities.
Kim said valuations and profits were not significantly challenged during the semiconductor crash, but were instead driven by technological factors and capital flows. Unwinding of leveraged positions has also eased as regulators have tightened rules and brokerages have normalized margin and risk requirements. That could leave the market on firmer footing than in the run-up to the crash.
Concentration risk — or reward?
Because Kospi relies on just a handful of semiconductor companies, its bull market is overly exposed to changes in sentiment toward AI.
“Right now, the Korean stock market is basically synonymous with AI hardware trading,” said Philip Uhl, head of research at Rayliant Global Advisors.
Wool said the pullback was partly technical, as the forced sell-off subsided, bullish buying returned and fears of a miss took hold. But bigger-than-expected earnings from big tech companies also raised expectations for AI infrastructure spending, contributing to the upward revision to growth forecasts for South Korean hardware companies.
“Anything that calls into question this narrative, whether it’s soft guidance on capital spending by hyperscalers, weak token prices, or concerns about Fed tightening, we can expect a pullback,” Uhl said. “As long as there is uncertainty about what AI hardware spending will look like, we expect volatility to continue.”
Supporting the bulls’ argument, Billy Leung, investment strategist at Global
The “Korean discount” refers to a long-standing trend of Korean companies trading at lower valuations than their global counterparts.
“KOSPI is in a bull market, but the more important question is whether the rally is being driven by speculation or by true improvement in fundamentals,” Leon said.
He sees South Korea as more of a fundamentally supported bull market than a speculative bubble, as expectations for semiconductor profits continue to rise. But increased retailer participation, concentrated index concentration, and ambitious market goals are also starting to resemble late-cycle behavior.
Some cautioned against reading too much into the 20% milestone.
“I’m cautious about describing this as a completely new bull market,” said John Inyun of Fibonacci Asset Management Global. He said the rebound represented both a technical recovery from the forced selloff and a “return to real stability.”
His base case is for the broad bullish trend to continue on the back of improving semiconductor earnings and risk appetite, but at a slower and more volatile pace. “After such a sharp rebound, some correction would be healthy. Investors shouldn’t expect the market to rise at the same pace from here.”
