Summary of Key Points
Recently, South Korea has witnessed a surge in investment in AI and semiconductors: The government has promoted the "Three Pillars" initiative (semiconductors, physical AI, and data centers), with companies like Samsung and SK Hynix investing $500 billion in new factories. Semiconductor exports have skyrocketed by 199.5% year-on-year, fueling a myth of rapid industrial wealth creation. Samsung employees receive bonuses that are ten times their average annual income, making them highly sought after in the dating market. Retail investors have joined in enthusiastically, buying not only local chip stocks but also overseas AI assets such as China's MiniMax and Cambricon, sometimes using leverage to chase higher prices. However, in July, the market plummeted: chip stocks dropped by more than 12%, and leveraged ETFs lost 20% in a single day. Foreign investors withdrew $70.8 billion, reigniting fears of sudden wealth loss. Behind this boom lies both real industrial growth and potential bubble risks.
I. Government and Corporate Initiatives: The Real Driving Force behind the AI Boom
South Korea's AI enthusiasm is not just hype; it's backed by substantial financial investments from the government and major corporations. President Lee Jae-myeong announced the "Three Pillars" plan, with Samsung and SK Hynix each building two new semiconductor factories in the southwestern region, totaling an investment of 800 trillion won ($500 billion). The technology ministry also stated that AI data center investments will exceed $650 billion by 2035.
Industrial data supports this optimism: In June, South Korea's semiconductor exports increased by 199.5%, generating $44.8 billion and contributing to the fastest growth in export revenue in half a century. This growth is evident in society: Samsung chip employees receive bonuses of up to $416,000 (while the average annual income in South Korea is less than $30,000). Marriage agencies consider semiconductor workers as "A+" candidates, and students are choosing vocational schools to learn about semiconductors (without a university degree, they can still get into top companies). Tutoring institutions have even launched courses for job applications at Samsung/SK Hynix.
II. Retail Investors Go Wild: From Local Chips to Chinese AI Assets
South Korean retail investors are eager to capitalize on the trend, expanding their investment scope:
- Local Stocks: Samsung and SK Hynix are core targets; SK Hynix's market value briefly exceeded $1 trillion, driving retail investors to buy shares aggressively.
- Overseas AI Stocks: After China's MiniMax went public in Hong Kong, South Korean investors bought $21 million worth of its shares (referred to as the "Chinese version of OpenAI"). Cambricon's A-share market saw nearly $20 million in purchases; other companies like Lanqi Technology and Northstar Microelectronics were also in high demand.
- ETF Products: Investors bought Chinese AI semiconductor ETFs, such as KB Asset Management's RISE China AI Semiconductor ETF, as well as the Roundhill Memory ETF (which invests in global memory chips, including those from SK and Samsung). In May, this ETF became the most purchased by South Korean retail investors in the U.S. ($317 million).
- Anything Related to AI: ETFs related to robotics or power grid equipment are also in demand, as investors believe that any AI-related sector will benefit.
III. A Market Turnaround: Plunge and Leverage Lead to Overnight Losses
The celebrations were short-lived. On July 2nd, the market crashed:
- Chip Stocks Drop: SK Hynix and Samsung stocks fell by more than 12%, causing the South Korean stock index to plummet by 9.99% and triggering a 20-minute trading halt.
- Leverage Exposure: The "Double Hynix ETF" (which magnifies price movements) lost over 20% in a single day. A Seoul resident who used a $15 million overdraft to buy Samsung leveraged funds went from a 20% profit to a 17% loss.
- Foreign Outflows: Foreign investors withdrew $70.8 billion from the South Korean stock market (the largest outflow in Asia) due to the rapid rise in chip stocks. Fund managers had to sell their positions to balance their portfolios, and retail investors, still buying, became the new buyers.
- High Leverage: South Korean retail investors' leveraged stock investments exceeded 60 trillion won, a 71% increase from the end of last year. Brokerage firms reached their lending limits. Regulatory authorities warned about leveraged ETFs, but training websites crashed due to overwhelming demand (over 350,000 people applying for trading qualifications).
IV. The Fear of Sudden Wealth Loss: Anxiety Fuels Excessive Investment
The phrase "becoming poor overnight" (벼락거지) has resurfaced, now referring to those who missed out on AI investments. Social media is filled with anxiety: "Just having savings feels like falling behind" and "It seems only I haven't gotten rich." This fear drove investment behavior: In May, the South Korean National Growth Fund (investing in AI and semiconductors) sold out within 10 minutes online and quickly offline. Investors were willing to take risks with leverage to seize the opportunity. However, the market crash left those who bought at high prices facing significant losses.
The contradiction is clear: While Samsung and SK Hynix hold key positions in global AI infrastructure (SK Hynix has a 58% market share in HBM), retail investors' fervor and high leverage have turned industrial growth into a potential bubble. The anxiety surrounding these investments continues as the market fluctuates.
In Conclusion
South Korea's AI investment boom reflects both a genuine golden age for the industry and a reckless gamble driven by anxiety. Whether the bubble will burst is unknown, but the stories of sudden wealth loss have already begun to unfold.