South Korean stocks have rebounded into a technical bull market just two weeks after a severe selloff, as renewed optimism over artificial intelligence-driven demand for memory chips lifted Samsung Electronics and SK Hynix and helped the benchmark Kospi recover sharply from its July low.
The Kospi closed 4% higher on Thursday at 6,813.34, putting the index 22% above its July 30 closing low and meeting the widely used threshold for a technical bull market, generally defined as a gain of at least 20% from a recent trough.
The rebound marks a dramatic reversal from the market’s steepest recent decline. The Kospi plunged about 40% between its June 22 peak and July 30 low, with losses concentrated in the index’s largest technology companies.
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Samsung Electronics and SK Hynix, the two dominant components of the Korean stock market, were at the center of both the selloff and the recovery. Their shares gained 5% and 6%, respectively, on Thursday as investors returned to semiconductor stocks on expectations that demand for memory used in AI systems will remain exceptionally strong.
The speed of the turnaround suggests that July’s collapse may have been driven more by positioning and capital flows than by a fundamental deterioration in South Korea’s technology sector.
Analysts at Macquarie Capital said the sharp decline, during which the Kospi lost 22% in July alone, appeared to have been driven primarily by investor positioning and fund flows. Foreign and institutional selling has stabilized since late July, while margin financing remains at reasonable levels, the analysts said in a note.
“The volatility is over,” Macquarie said.
The stabilization of fund flows has provided room for investors to reassess the outlook for the country’s semiconductor industry, particularly as demand for memory chips used in AI infrastructure continues to accelerate.
Samsung and SK Hynix accounted for 71% of the Kospi’s losses during July, according to Macquarie. Their shares fell 48% collectively during the rout, compared with a 26% decline across the remainder of the market. That concentration has also amplified the subsequent recovery. As investors returned to the two companies, their large weightings in the index helped propel the broader Kospi higher.
Macquarie expects the two chipmakers to remain at the forefront of the rebound, supported by what it describes as an increasingly severe imbalance between AI-related memory demand and available supply.
“We are facing the worst memory crunch in history and see no signs of supply constraints easing within the next three years,” the bank said.
The investment bank said demand generated by AI inference, the process of running trained AI models to produce responses and perform tasks, is “off the charts.” Unlike traditional computing workloads, large-scale AI systems require substantial amounts of high-bandwidth memory and other advanced memory products, putting additional pressure on manufacturers.
The supply response is also constrained by the complexity and cost of expanding semiconductor production. Memory manufacturers cannot rapidly increase output simply in response to a sudden increase in demand, making supply shortages potentially persistent if AI infrastructure investment continues to accelerate.
That dynamic has strengthened the investment case for South Korea’s semiconductor industry even as the market remains highly volatile.
The Kospi’s recovery, however, does not guarantee that the broader rally will continue. A technical bull market describes the magnitude of a rebound from a low rather than the durability of the underlying trend.
The index is up 3.3% so far in August, suggesting trading conditions have become calmer following July’s severe losses. The stabilization of foreign and institutional flows could provide further support, although the market remains highly sensitive to movements in major semiconductor stocks.
Macquarie has set a year-end target of 8,000 for the Kospi, implying about 17% upside from Thursday’s closing level of 6,813.34.
The forecast rests heavily on continued strength in AI-related semiconductor demand. If memory demand remains strong and supply remains constrained, Samsung and SK Hynix could continue to drive earnings growth and support higher valuations.
For investors, the rapid shift from a 40% market decline to a technical bull market in just two weeks shows that sentiment can quickly change in a market dominated by semiconductor companies.
South Korea’s latest rally is therefore both a recovery story and an AI infrastructure story. The same concentration in chip stocks that intensified the July selloff is now accelerating the rebound, leaving the Kospi’s next phase closely tied to the outlook for memory prices, AI investment, and the earnings trajectory of Samsung and SK Hynix.