South Korea's stock market has doubled this year, SK Hynix surges 250% to lead the pack, analysts say the rally is only halfway through.

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The South Korean stock market is experiencing a historic surge. Driven by a wave of AI-driven demand for memory chips, the country's benchmark index, Kospi, has more than doubled this year, breaking past 100%. Not only has it surpassed the historic gains of the internet bubble era, but in just a few months, it has soared from 5,000 points to 8,000 points.

On Wednesday, the Kospi rose as much as 5.1% in a single day, hitting a record high. SK Hynix’s stock price has surged more than 250% this year, with its market value exceeding $1 trillion. Samsung Electronics has also performed strongly. Together, these two memory giants contributed the core driving force behind this rally.

J.P. Morgan has raised its Kospi target twice in less than a month, with its latest bull market scenario target at 10,000 points, leaving about 33% upside from current levels.

Some analysts believe this rally is not a repeat of a bubble but a structural shift, where global demand for memory chips is moving from cyclical patterns to sustained growth. However, risks from market concentration are accumulating, and some investors are beginning to be cautious about the Korean market’s heavy reliance on a few AI-related stocks.

Kospi Doubles This Year, Sets Historic Record

Korea’s Kospi index has doubled this year, surpassing the Nasdaq 100's 102% gain in 1999 before the dotcom bubble burst and exceeding the historic highs reached during Korea’s industrial boom in the late 1980s.

What’s especially striking is that 2026 isn’t even halfway over, yet Kospi is already setting records. The index climbed from 5,000 to 8,000 points in just a few months, making it one of the best-performing indices globally.

J.P. Morgan raised its baseline target for Kospi to 7,000 and its bull scenario to 8,500 at the end of April, then less than a month later raised the baseline to 9,000 and the bull scenario to 10,000 points.

Hynix Leads Gains, AI Memory Demand Reshapes Valuation Logic

SK Hynix is the star of this rally. Its stock has gained more than 250% this year, market cap breaking $1 trillion, making it one of the hottest investments in the global wave of AI infrastructure funding.

KB Securities global investment strategist Peter Kim told CNBC that SK Hynix and Samsung Electronics’ fundamentals and valuation logic remain solid. He pointed out that despite the sharp price rises, analysts’ earnings forecasts have increased even faster than share prices, so valuations are actually falling. "In fact, it’s surprising that valuations are getting cheaper, because analysts’ earnings upgrades are outpacing share price gains," Kim said.

He further pointed out that U.S. memory giant Micron trades at about 12 times earnings, while SK Hynix and Samsung are only about 6-7 times, based on analyst forecasts. "From a fundamental valuation perspective, I think we’re only halfway through this incredible rally," Kim said.

Wedbush Securities analyst Dan Ives recently likened the current AI boom to the “third inning of a nine-inning game” and noted that demand for high-bandwidth memory (HBM), DRAM, and NAND memory has reached “unprecedented levels.” Ives said SK Hynix is the primary beneficiary of this “memory supercycle,” and the duration and scale of this cycle is still significantly underestimated by the market.

Structural Demand Shift, Is This Only Halfway?

Despite Kospi’s gains rivaling the Nasdaq during the dotcom era, most market observers are not sounding alarm bells. They believe the rally is driven by a structural shift: the global demand for memory chips is moving from cyclical volatility to a long-term growth trend.

Dan Ives points out that as cloud computing giants ramp up AI infrastructure investment, chip demand continues to outpace supply, and large tech companies’ capital spending is projected to reach about $725 billion.

Peter Kim believes that the key risk that typically ends a semiconductor upcycle—overcapacity—won’t likely occur in the short term. “What really ends this cycle, ultimately, is overcapacity, but capacity release takes at least a few years,” he said. “That’s why I think we’re only about halfway through this rally.”

However, not all investors are unreservedly optimistic. Samsung Electronics and SK Hynix together account for over 40% of Kospi’s index weight, a highly concentrated market structure that worries some investors. They fear that if supply chains are disrupted or global investment in data centers slows, the overall market could face greater downside risk.

Peter Kim admits the market is now “highly polarized,” with a handful of AI stocks having a disproportionate impact on the benchmark index.

Rayliant Global Advisors Chief Portfolio Manager Philip Wool said that AI enthusiasm was previously a phenomenon in developed markets, but now it’s clearly spreading to emerging markets. Stocks like SK Hynix, TSMC, and Samsung now face a “higher bar for outperformance,” since investors increasingly take extraordinary AI capital spending for granted.

Risk Disclosure and DisclaimerThe market carries risk; invest with caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions herein suit their circumstances. Any investment based on this is at your own risk. ```