South Korea's chip giants just logged their biggest rally ever. What it means for the global AI trade.

By Barbara Kollmeyer

Kospi's record day can't save the worst monthly decline since 2008

Foreign exchange dealing room in South Korea shows Kospi's surge on Friday, with AI-chip makers SK Hynix and Samsung soaring.

On the heels of a tech-led rebound for Wall Street and fresh optimism around the AI trade, Korea's stock market came roaring back to life on Friday.

Snapping a bruising, three-session losing streak, the Kospi KR:180721 closed up 17.9%, its biggest percentage rise on record, according to Dow Jones Market Data stretching back to 1985, . The tech-heavy index's memory-chip superstars - SK Hynix (KR:000660) (SKHY) and Samsung (KR:005930) - surged 29% and 26%, respectively. Those were the largest gains on record based on available data back to 1997 for SK Hynix and 1998 for Samsung.

Friday's dazzling session couldn't save the Kospi from a 22% slump for July, the biggest one-month decline since October 2008. A roller coaster week has been driven by developing investor concerns about the sustainability of the AI capex boom, which has been in focus as U.S. tech majors reported, along with those two Korean chip giants.

Also troubling shareholders of SK Hynix and Samsung Electronics were the reports earlier this week that Chinese competition could threaten margins and market share. This came after The Information revealed China had designed its first deep ultraviolet lithography machines used in manufacturing DRAM and NAND chips.

The Kospi surge was simply "extraordinary," Rolf Bulk, Singapore-based head of semiconductors and infrastructure at research firm The Futurum Group, told MarketWatch in a phone interview. But he also doesn't expect to see a repeat of such a day, given so many factors had fused to drive Friday's action.

"Over the last few days we've had Microsoft, Amazon and Meta report their earnings and all of these companies are confirming that compute demand continues to exceed supply and either raising caps [capital expenditure] or maintaining caps, but they're very very consistent in the messaging that demand for compute is very strong," Bulk said.

Samsung, whose stock finished almost flat on Thursday after reporting record quarterly profit, was also "very consistent in the messaging, saying that the memory is going to remain tight into 2028 and potentially beyond."

Those earnings were another sign that the pullback seen in SK Hynix and the broader index have been "detached from the fundamentals," he said. After months of intense retail speculative activity in Korea, supercharged by the introduction of highly leveraged exchange-traded funds, the reversal in the Korean market led to a massive deleveraging and the forced liquidation of positions bought on margin.

So-called debt investing, or buying on margin, has been a major feature of the Korean stock market in 2026 and the source of much of its volatility. Korean retail investors, known as "ants," have been hit with repeated margin calls throughout the correction. Even two weeks ago, it was estimated that one in 30 Korean adults had experienced a margin call.

"I would expect most of the forced selling that we have seen over the last few days is behind us," said Bulk.

Some on Wall Street were betting that the reported implosion of Situational Awareness, a highflying hedge fund run by former OpenAI researcher Leopold Aschenbrenner, could mark a bottom for the AI trade.

The hedge fund reportedly sold the bulk of its public-equity portfolio, possibly to Citadel, the hedge fund founded by billionaire Ken Griffin. This followed heavy losses sustained over the past month. Based on regulatory 13F filings in March, Situational Awareness has been an investor in big chip stocks. It was also a cornerstone investor in SK Hynix's recent U.S. debut.

It was "sitting right in the middle" of the massive rally for memory stocks and "heavily leveraged into that rally continuing," said Bulk.

With those positions being taken over, "to a lot of people that plays into the sentiment that the leveraged positions are being washed out of the market and that, in combination with those strong fundamentals, gives the market a perspective to look forward again," said Bulk.

He added that Korean markets also got a boost Friday from news that SK Group Chairman Chey Tae-won bought 4.8 billion won ($3.31 million) worth of SK Hynix shares for the first time on Thursday, to express his confidence following three sharp days of losses, including a 14% drop on Tuesday.

Some expressed wariness over getting too excited about Korea's bounce.

Kevin Muir, the author of The MacroTourist newsletter and former trader, told MarketWatch that investors should remember that "the largest, sharpest, most violent rallies occur in bear markets," with the Kospi still down in double digits this month.

"Leopold got Amaranth'd and now we're bouncing from that liquidation. That's it. Nothing more. Maybe we bounce a little more from here, but on the whole, the AI bubble has burst and rallies should be sold," Muir said.

Jules Rimmer contributed to this report.

-Barbara Kollmeyer

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