London, 31 July 2026 — EBM Newsdesk Analysis — By Anthony Gill
South Korea’s stock market surged almost 18 per cent on Friday as investors rushed back into artificial intelligence stocks, producing the largest one-day gain in the history of the country’s benchmark index.
The Kospi closed 17.9 per cent higher at 6,695.45, with Samsung Electronics jumping 28 per cent and memory-chip producer SK Hynix gaining 30 per cent. The extraordinary rebound followed a decline of more than 17 per cent earlier in the week, when doubts about AI valuations and Chinese competition triggered forced selling across one of the world’s most concentrated technology markets.
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SubscribeSouth Korea has moved from boom to crash and back again with a speed rarely seen in a major developed market. Only days ago, the sell-off appeared to confirm the warning contained in EBM’s analysis of the Kospi’s increasingly fragile AI-led advance.
Friday’s rally does not disprove that argument. It strengthens it.
Microsoft Restores the AI Narrative
The immediate trigger came from the United States.
Microsoft’s latest results reassured investors that enormous spending on data centres and computing infrastructure is beginning to generate revenue rather than merely consume capital. Its continued commitment to AI investment revived demand for the companies supplying the memory chips, processors and equipment behind that expansion.
That matters disproportionately to South Korea. Samsung and SK Hynix sit at the centre of the global memory market and have become direct proxies for expectations surrounding AI infrastructure.
The same concentration that powered the Kospi to record highs also produced the historic 12 per cent collapse recorded earlier this year. When investors believe AI spending will continue, Korea outperforms. When doubts appear, there are few other sectors large enough to absorb the selling.
SK Hynix received an additional vote of confidence when chair Chey Tae-won reportedly purchased about $3.2mn of the company’s shares. The gesture was small relative to the company’s value but powerful enough to reinforce the idea that this week’s sell-off had gone too far.
Leverage Turns a Rebound Into a Surge
The scale of the move cannot be explained by corporate fundamentals alone.
South Korean retail investors had built large positions through leveraged exchange traded funds and other products designed to magnify daily market movements. As prices fell, those positions intensified the decline. When sentiment reversed, traders who had bet against the market were forced to buy shares back, turning an ordinary recovery into an 18 per cent surge.
Regulators introduced measures to limit riskier leveraged trading during the turmoil, but the episode shows how quickly market structure can overwhelm the underlying investment argument.
EBM warned after a recent 4.5 per cent fall in Seoul that the unresolved question was not whether companies would continue spending on AI, but whether that expenditure would produce returns sufficient to justify semiconductor valuations.
Microsoft offered a reassuring answer for one quarter. It did not settle the long-term debate.
A Global Semiconductor Rebound
The enthusiasm spread across Asia.
Taiwan’s Taiex rose about 8 per cent as TSMC and other technology companies advanced, while Japan’s Nikkei gained 4 per cent. The rally followed a powerful recovery on Wall Street, where memory, storage and semiconductor shares rose after Microsoft’s results eased fears of an imminent collapse in AI investment.
The move confirms that South Korea’s market is no longer merely a domestic economic indicator. It is one of the most leveraged expressions of the global AI capital cycle.
The government and private sector are planning investments worth more than $1tn in semiconductor capacity and related infrastructure. As EBM argued when examining Korea’s vast chip investment programme, the country is making a decade-long wager that AI demand remains structurally elevated.
The Verdict
My view is that Friday’s rally is evidence of continuing demand, but not of renewed stability.
Samsung and SK Hynix are profitable companies supplying components the global technology industry genuinely needs. The AI boom is not imaginary, and the market had probably fallen too far during the week.
But a healthy market does not normally lose 17 per cent and regain 18 per cent within days. Those movements reveal leverage, concentration and an investor base trading the direction of the AI story rather than carefully valuing individual businesses.
The global technology sell-off showed how quickly doubts in New York can detonate in Seoul. Friday demonstrated that reassurance travels just as fast.
South Korea is once again the world’s most exciting equity market. It may also be its least forgiving.
