The Tamesis
The exchange rate between the KOSPI and the South Korean won is displayed in the trading room of Woori Bank on Thursday, May 7, 2026 in Seoul, South Korea.
SeongJoon Cho/Bloomberg
Not since the darkest days of 1997 has South Korea’s market moved as wildly as a major earthquake detected by seismometers.
Welcome to 2026 in South Korea, and apparently, this is considered a good thing. Benchmark stock indexes of the world’s top 15 economies soared 5% on Wednesday alone on optimism that trade in artificial intelligence will continue to develop rapidly and benefit the country’s 51 million people. The Kospi is up 90% so far this year, and it’s not even June yet.
Employees at chip manufacturing giants SK Hynix and Samsung Electronics are certainly feeling great. SK Hynix just joined the $1 trillion market capitalization club, becoming the third company to do so. SK Hynix shares soared 13% on Wednesday alone, pushing its 12-month gain past the 1,000% mark.
Who needs Bitcoin when public companies trade so erratically? Artificial intelligence chip makers increasingly move up and down like meme stocks. Or like a financial EKG machine sensing huge heart palpitations.
Such fluctuations should not be normalized. Fluctuations in the Kospi index are becoming dangerous for South Korea’s $1.9 trillion economy. Especially considering that South Korea has become a huge leveraged bet for the AI industry, not only continuing to grow but also driving economic growth to even higher levels.
After the events of the first quarter, it’s easy to see why President Lee Jae-myung might think artificial intelligence is the answer to all South Korea’s economic prayers. Despite weak domestic demand, rising inflation and great uncertainty, South Korea’s exports increased significantly by about 40% year-on-year in the first quarter.
In the first 20 days of May, exports increased by nearly 65% year-on-year, led by computer equipment (up 305%), semiconductors (up 202%) and petroleum products (up 46%), easily offsetting a 10% decline in automobile exports.
Lee’s team hopes that AI will free Seoul from the hard work of improving productivity, leveling the corporate playing field, empowering women and creating more economic space for startups to disrupt the economy. Maybe Team Li is right and AI is the panacea for all economic problems.
Yet succumbing to arrogance is now more dangerous than ever. Much of the AI energy aimed at transforming South Korea flows through the family-owned conglomerates that have dominated the economy for decades. This would certainly hamper efforts to reduce the concentration of economic power in these so-called chaebols. If the AI trade runs out of fuel, the impact on South Korea will be more severe than ever.
This arrogance can be seen almost everywhere in Seoul. For example, Lee Myung-bak’s Democratic Party has been considering using profits from artificial intelligence to fund a “people’s dividend” to reduce inequality. However, this seems more like a Band-Aid than a recipe for improving South Korea’s economic competitiveness.
Of course, South Korea is not alone. Taiwan’s stock market has just surpassed India’s to become the fifth largest stock market in the world. Only the United States, China, Japan and Hong Kong ranked higher. That’s quite a feat for an economy with a population of just 23 million. Taiwan’s stock market capitalization has just surpassed that of India, and its population is 60 times that of India.
A decade ago, news that South Korea’s auto exports fell 10% in a quarter might have triggered a national crisis. But it’s no problem these days. This week, the Kospi gained 100% in 2026, matching the Nasdaq 100’s 102% gain in 1999. That was before the dot-com bubble burst.
It’s unclear whether South Korea’s 216% growth over the past 12 months is justified. But Asia could run into problems when regular trading begins on major stock exchanges like cryptocurrencies or meme stocks.
