Wall Street and Korea markets becoming more intertwined

Tech moves on Wall Street and the South Korean stock market are increasingly intertwined as AI spending ties the fortunes of U.S. tech giants and Korean memory chip makers together.

60-day correlation between kospi And Nasdaq 100 It recently climbed to around 0.50, its highest level since 2021, according to data provided by Rayliant.

The growing relationship reflects the increasing dominance of Samsung Electronics and SK Hynix, which together account for more than half of the Kospi index. Both companies are at the center of the AI ​​hardware supply chain, supplying the memory chips needed for data centers operated by US tech giants.

“The correlation has increased because KOSPI has become a semiconductor index,” Futurum Group analyst Rolf Bulk told CNBC via email.

Samsung and SK Hynix are increasingly reliant on the same hyperscaler spending that is driving earnings at U.S. semiconductor and technology companies. Data center demand has risen from about 40% of global DRAM demand last year to more than half this year, according to Bulk, which expects this share to grow further. DRAM or dynamic random access memory is used in AI servers.

This gives investors in Asia an early read on the power of global AI trading before Wall Street opens.

“Samsung and SK Hynix are providing the first liquid market response to overnight developments impacting global AI demand,” said Jung In Yun, founder of Fibonacci Asset Management. “SK Hynix in particular has become an important barometer because it has high-bandwidth memory, one of the most critical components in the AI ​​supply chain.”

Recent trading illustrates this dynamic. On July 13, Kospi fell more than 8%, driven by SK Hynix’s 15% decline and record decline. Likewise, Nasdaq 100 closed the day with a 1.88% decrease. Shares of big tech names fell that day. Micron Technology closed down 4%, Sandisk fell 12%, Intel fell 6%.

Korea’s memory chip rally started later than Nasdaq’s advance because U.S. investors initially focused more on hyperscalers, said Peter Kim, head of global investment strategy at KB Financial Group. But the scale and volatility of the recent rally has prompted global investors to view Korea as a frontrunner in the broader AI trade.

Samsung’s earnings guidance could also provide one of the first concrete signals on the state of AI demand each quarter. The company typically reports earnings about two weeks before major U.S. semiconductor companies.

But analysts warned that Korean and US tech stocks are moving together rather than constantly tracking each other.

“The fortunes of U.S. tech stocks and Korean tech stocks are increasingly being driven by a common fundamental factor, which is sentiment towards the AI ​​hardware trade,” said Phillip Wool, head of research at Rayliant Global Advisors.

When news about artificial intelligence breaks while U.S. markets are closed, Samsung and SK Hynix could serve as proxies for how investors will react when Wall Street reopens. When developments occur during U.S. trading, Nasdaq similarly offers a preview of the next Korean session.

A closer relationship also carries risks. Industry veterans said the increased correlation was eroding the diversification benefits investors have traditionally sought to achieve by holding U.S. and Korean stocks.

“Korea is no longer diversifying against US tech. With half the index tied to a single cyclical theme, a slowdown in hyperscaler capex would hit the Korean market harder than many other markets,” Bulk said.

He also added that Korean memory stocks are inherently more volatile than many U.S. chipmakers, with swings amplified by leveraged exchange-traded fund flows.

Similarly, Wool emphasized that as the AI ​​theme increasingly becomes the dominant driver of both Korean and US tech stocks, investors are losing one of the main reasons to hold both markets: geographic diversification.

“When all these markets are essentially driven by this big risk factor, you find that you lose the benefit — international diversification — that led you to expand into geographically different markets like the U.S. and Korea.”

However, there may be larger differences over time. MicronKim said Samsung and SK Hynix are currently benefiting from the same increase in DRAM prices, but differences in capital expenditures, product mix and U.S. support for domestic chip production could eventually separate their performance.

China’s expansion into memory chips is another emerging risk, he added. While Chinese manufacturers lag behind their global rivals technologically, their progress often exceeds investor expectations. Shares of chipmaker Changxin Technology Group soared 466% in its debut on Shanghai’s tech-heavy STAR Market on Monday, making CXMT the most valuable company listed in China.