The correlation between Wall Street’s tech sector and South Korea’s stock market is intensifying, driven by the growing significance of artificial intelligence spending. Recent data shows the 60-day correlation between the Kospi and Nasdaq 100 has surged to around 0.50, the highest since 2021, largely due to the dominance of Samsung Electronics and SK Hynix in the AI hardware supply chain. These companies, which represent over half of the Kospi index, are crucial suppliers of memory chips for U.S. data centers, linking their fortunes closely with U.S. tech giants.

This interconnectedness underscores the shifting dynamics in global semiconductor demand, particularly as data-center consumption of DRAM rises from 40% to over 50% of global demand. As a result, movements in Korean memory stocks like SK Hynix can foreshadow trends in U.S. tech stocks, with recent trading illustrating this correlation. For instance, a significant drop in SK Hynix shares led to a decline in the Nasdaq 100, highlighting the emerging role of Korean firms as bellwethers for AI-related market sentiment.

Investors should be cautious, as this rising correlation diminishes the diversification benefits traditionally associated with holding both U.S. and Korean equities. With the fortunes of these markets increasingly tied to the same AI-driven themes, a slowdown in hyperscaler capital expenditures could disproportionately impact the Korean market, suggesting a need for strategic reassessment in portfolio allocations.

Source: cnbc.com