Korea still riding AI investment supercycle, but risks are building
Participants attend the 2026 KB Jefferies Korea Conference at the Fairmont Ambassador Seoul, Wednesday. Korea Times photo by Lee Yeon-woo
Samsung, SK hynix continue to be clear winners
Korea has been one of the clearest winners of the global artificial intelligence (AI) boom, as U.S. hyperscalers pour hundreds of billions of dollars into data centers and computing infrastructure, driving demand for memory chips made by Samsung Electronics and SK hynix.
Chipmakers are benefiting from those investments even without having to prove that AI itself can generate adequate returns. For now, the cycle remains firmly in Korea's favor.
But the foundations of that boom are becoming more fragile, according to global market participants gathered at the KB Jefferies Korea Conference at the Fairmont Ambassador Seoul, Wednesday.
Its durability increasingly depends on capital markets continuing to finance ever-greater AI spending, even as other capital-intensive sectors compete for funding and geopolitical shifts threaten to strengthen Chinese rivals.
Those risks are beginning to feature more prominently in investors' calculations.
"I don’t think I've ever seen a chart like that in a major market before," said Christopher Wood, global head of equity strategy at Jefferies, referring to Korea's sharp outperformance relative to the MSCI Asia Pacific ex-Japan Index.
"The biggest risk to this story, in my view, is that at some point the market suddenly decides we're not going to be able to monetise this capex [capital expenditure]. Then the sort of credit card is taken away," he added.
Wood said that from an equity perspective, a rise in the U.S. 10-year Treasury yield above 4.5 percent would amount to a "yellow warning signal" for the stock market, while a move above 5 percent would pose a more serious threat to equities. That threshold has not yet been reached.
Even if investors remain willing to fund, however, the sector is not competing for capital in isolation.
Gavekal CEO Louis-Vincent Gave noted AI is far from the only sector requiring heavy capital spending. As global conflicts end, countries will need to rebuild inventories of key commodities, expand shipbuilding and shipyard capacity, develop domestic rare-earth industries, replenish military stockpiles and rebuild power grids around the world, he said.
"The bottom line is that the demand for money continues to be super strong everywhere," Gave said.
Beyond financing conditions, Korea also faces a longer-term challenge from shifts in geopolitics and the rise of Chinese competitors.
Former Bank of Korea Gov. Rhee Chang-yong said the current supercycle could remain a major blessing for the economy if it continues for 5 to 10 years. However, he cautioned that shifts in the geopolitical landscape and technological advances by Chinese chipmakers could reshape the industry.
"This current supercycle benefit is definitely due to the competitiveness of our two companies, but it is also partially a windfall from the U.S.-China conflict," Rhee said.
Rhee warned that second-tier chipmakers, including Chinese companies, were accumulating large cash reserves as prices rose not only for high-end products such as high bandwidth memory but also for legacy semiconductors such as DRAM.
"If they use this cash for investment during the downturn, the catch-up process can be quite fast, and the future landscape of the semiconductor industry may be different," he said.