TL;DR
· Last Friday, the global semiconductor sector experienced a sharp decline, leading to a mid-day circuit breaker in the South Korean stock market on Monday, with Samsung Electronics and SK Hynix dragging down the market. · However, following the weekend after the plunge, Jensen Huang made a high-profile visit to South Korea to strengthen cooperation with the Korean AI supply chain, prompting the market to reassess whether this was truly the peak of the AI cycle or a case of a crowded trade unwinding. · Related Tickers: 000660.KS (Korean Stock), 005930.KS (Korean Stock), NVDA (US Stock), MU (US Stock), AVGO (US Stock), EWY (Korea ETF), SOXX (US ETF)
The South Korean stock market just experienced its most intense plunge of the year.
After Monday's opening, the KOSPI plummeted by nearly 9% intraday, triggering a circuit breaker. Samsung Electronics and SK Hynix both tumbled, leading the market to discuss whether the AI bull market has reached a turning point.
However, while market panic selling was underway, another significant event was unfolding in Seoul.
Over the weekend, Jensen Huang embarked on a trip to South Korea, where he not only met with SK Group Chairman Choi Tae-won but also announced a new multi-year collaboration agreement between NVIDIA and SK Hynix to jointly develop a new generation of memory products for AI data centers. At the same time, he engaged intensively with South Korean tech companies such as Samsung Electronics, LG, and NAVER, reaffirming that AI infrastructure development is still in its early stages.
Consequently, the market witnessed a stark contrast.
On one side, South Korea's leading AI companies faced concentrated sell-offs; on the other side, the most core customer in the AI industry chain continued to strengthen its ties with the Korean supply chain.
If AI demand were indeed beginning to collapse, Jensen Huang would not need to fly to Seoul to reinforce cooperation.
That's why a new debate has emerged in the market today.
Is the Korean market really preemptively reflecting the peak of the AI cycle, or is it undergoing a typical high-leverage deleveraging?
South Korea Emerges as One of the Most AI-Sensitive Trading Markets Globally
Although this decline occurred in South Korea, the trigger did not originate from Korea.
Last Friday, the US semiconductor sector faced significant sell-offs. The Philadelphia Semiconductor Index saw one of its largest single-day declines in recent years, with companies like Broadcom and Micron, among others in AI infrastructure, simultaneously retreating. Subsequently, the market began to reassess the risk exposure of high-valuation tech stocks.
South Korea has become the most directly impacted market.
Over the past year, the core driving force behind the South Korean stock market's rise has not been the domestic economy but rather AI data center construction, HBM demand growth, and the expansion of the NVIDIA industry chain.
Samsung Electronics and SK Hynix together hold a very high weight in the South Korean market. When global funds want to bet on AI infrastructure, South Korea is one of the most convenient entry points; and when funds begin to reduce their AI exposure, South Korea naturally becomes one of the easiest markets to sell off.
Therefore, the drop in the South Korean market is much greater than that of the U.S. market itself.
In a sense, South Korea is no longer just a national index but more like a large AI memory ETF.
Huang Renxun's Visit to South Korea Creates a Sharp Contrast with Market Panic
If market panic stems from valuation, then the biggest positive news over the weekend comes from the industry chain itself.
Huang Renxun's core goal of visiting South Korea this time was very clear: to further strengthen the cooperation between NVIDIA and the South Korean AI supply chain. Of particular interest was the announcement of a new multi-year cooperation agreement between NVIDIA and SK Hynix. Over the past two years, HBM has become one of the most critical components of AI servers, and SK Hynix is currently one of the biggest beneficiaries.
That's why the market is paying close attention to this collaboration.
Over the past few months, as the scale of AI infrastructure construction has continued to expand, the market has started to worry about whether the HBM demand growth rate will gradually peak. But Huang Renxun's visit to South Korea at this time actually sent out the opposite signal. If NVIDIA believes that AI data center construction is nearing completion, it is not necessary for them to further strengthen long-term cooperation with suppliers at this point in time.
From the perspective of the industry chain, the market has not yet seen evidence of a sudden disappearance in AI demand.
The most interesting aspect of the past two days lies here. The capital markets are expressing concerns about the valuation of the AI sector through stock prices, while the most crucial companies in the industry chain are still discussing expansion and cooperation plans for the next few years. There is still a clear gap between the prices the market is offering and the signals the industry chain is sending out.
The AI Bull Market is Beginning to Enter a Stage of Profit Pool Reevaluation
This is also where the current biggest discrepancy lies.
Over the past year, the market's trading has followed a very simple logic: growing AI demand. As a result, Nvidia rose, Micron rose, SK Hynix rose, Samsung Electronics rose—any company related to AI saw almost all of them gaining in valuation.
However, as the sector's gains continued to expand, the market has begun to enter the second phase.
Investors are no longer satisfied with the story of "AI will grow" and have started to ask another question: Who ultimately benefits from the profit generated by AI growth? In recent months, from memory adjustments in Rubin cabinet systems, to the market reaction after Broadcom's earnings report, to the recent market plunge in South Korea, fundamentally all reflect the same thing—the market is starting to dissect the AI profit pool.
SK Hynix benefits from HBM, Samsung Electronics is simultaneously pursuing HBM, DRAM, and advanced packaging, while Micron is more reliant on the overall memory upgrade in AI servers. Although everyone is part of the AI industry chain, the sources of profit and pricing power are not the same.
In the past, the market was willing to give the entire sector a valuation expansion, but now funds are beginning to individually scrutinize whether these profits can actually materialize.
This is also why a supply chain news, an earnings report guidance, or even a capital expenditure adjustment could trigger significant fluctuations in the entire sector. The focus of market trading has shifted: rather than whether AI will continue to grow, investors are more concerned about where the growth will ultimately show up on the financial statements.
The Direction of the Korean Stock Market is Not Determined by Korea
In the coming weeks, what will truly determine the direction of the Korean market is still Nvidia's orders, HBM supply and demand, and cloud provider capital expenditures.
If this data begins to weaken, then this recent plunge may just be the start of a larger-scale valuation adjustment.
But if data center construction, GPU shipments, and HBM procurement continue to maintain high growth, then Monday's circuit breaker might look more like a clearance sale in a crowded trade.
At least for now, the prices the market is offering and the signals the industry chain is emitting are not entirely aligned.
On one side, South Korea's AI leader is facing one of the most intense sell-offs in recent years; on the other, Huang Renxun is in Seoul discussing next-generation AI infrastructure with supply chain partners.
Which judgment is closer to reality may soon have an answer.
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