South Korea and Taiwan’s benchmark indexes have surged to record highs this year, driven primarily by a select group of artificial intelligence (AI) winners. The Kospi index in South Korea has jumped over 80%, while Taiwan’s Taiex has repeatedly set new records, largely due to the booming semiconductor sector. Goldman Sachs highlights that Taiwan is over 80% exposed to AI-related revenues, with Taiwan Semiconductor Manufacturing Company (TSMC) alone accounting for over 40% of the Taiex index. In South Korea, Samsung Electronics and SK Hynix represent a significant 42.2% of the Kospi.

This concentration raises concerns about market volatility and the potential for shocks, particularly as both countries are heavily reliant on AI demand and face risks from geopolitical tensions and supply chain disruptions. Analysts warn that while current gains reflect strong earnings growth, they may not accurately represent broader economic health, especially in Taiwan, where the market is increasingly detached from domestic fundamentals.

Investors should be cautious of the heightened concentration risk in both markets, as reliance on a narrow group of exporters could expose them to significant volatility. As the AI frenzy continues, the potential for a market correction looms, particularly if global demand shifts or if geopolitical tensions escalate, underscoring the importance of diversification in portfolio strategies.

Source: cnbc.com