South Korea surpasses India to become the world’s sixth largest stock market.

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South Korea’s stock market has surged strongly on the wave of artificial intelligence chips, with its market capitalization soaring by 86% this year to $5 trillion, surpassing India’s $4.8 trillion, and becoming the world’s sixth-largest stock market.

Samsung Electronics and SK Hynix are the core driving forces of this rally—both companies have joined the trillion-dollar market cap club. At the same time, the corporate reform agenda promoted by South Korean President Lee Jae-myung has resonated with the AI investment theme. The Korea Composite Stock Price Index (Kospi) has already broken through the 5,000-point target set by Lee Jae-myung this year, and Wall Street analysts have now raised their target to 10,000 points.

India’s stock market, on the other hand, has encountered multiple headwinds: the rupee continues to weaken, there’s a record net outflow of foreign capital, and a lack of listed companies directly benefiting from AI infrastructure construction, resulting in India’s benchmark stock index falling about 11% so far this year, risking its first annual decline in a decade. Global funds have sold about $26 billion worth of Indian local stocks this year.

Chip giants drive market cap surge, but concentration risk cannot be ignored

According to data compiled by Bloomberg, the total market capitalization of South Korean listed companies has surged 86% this year to $5 trillion, while India’s market value has fallen back to $4.8 trillion. As core players in the global memory chip sector, Samsung Electronics and SK Hynix are the main forces supporting this upswing.

Gerald Gan, Chief Investment Officer at Reed Capital Partners, said, this rally “highlights the ongoing importance of Korean tech companies in the next wave of technological innovation,” and “reflects a broader shift in global capital flows toward major Asian economies—markets that have long been overshadowed by their Western counterparts but are now playing increasingly prominent roles in shaping the future of technology and growth.”

South Korea’s overtaking of India is the latest step in its string of milestones this year—it had previously surpassed Canada and several European countries.

Despite the dazzling rally, structural concerns about the South Korean stock market have not faded among market participants. Ross McGarry, Senior Investment Analyst at Asset Value Investors, noted, “This year’s surge has been mainly driven by the memory cycle—Samsung and SK Hynix have accounted for the vast majority of the gains.”

He called South Korea’s approach to and overtaking of India “an impressive milestone,” but emphasized that the real test lies in whether South Korea can maintain this rerating through meaningful corporate governance reform.

This warning points to the core contradiction of the South Korean market: the gains are highly concentrated in a few stocks, and market breadth is limited. If AI investment enthusiasm wanes or the memory chip cycle reverses, the sustainability of the overall market cap will come under pressure.

India’s stock market faces multiple headwinds

The decline in India’s stock market is not the result of a single factor. The rupee’s depreciation has eroded the dollar value of assets, high energy costs have driven up inflationary pressure, and combined domestic and international political challenges have led to a continued withdrawal of global funds. Gerald Gan said:

“The allure of India’s growth story is waning in the minds of investors, while persistent infrastructure shortcomings continue to limit its ambitions in advanced manufacturing.”

However, from a fundamental economic perspective, according to IMF estimates, India’s GDP is about $4.15 trillion, far surpassing South Korea’s $1.93 trillion, and is still one of the world’s fastest-growing major economies.

Stanley Tang, Senior Portfolio Manager at Sumitomo Mitsui DS Asset Management, pointed out that one of the core investment logics for Indian stocks lies in the expectation of “J-curve” style domestic consumption growth after per capita GDP crosses $4,000.

IMF data shows that India’s per capita GDP is about $2,810 this year, still some distance from this threshold. “The long-term logic remains intact, but inflation is creating near-term resistance,” Tang said.

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