8:31
South Korea may have an ant problem. Although it's not these type events, but rather these. 'Speaking Korean' There are more than 14 million retail investors in South Korea who are called 'ants'. Individually, they don't have much power, but collectively they have a greater influence in the market. These ants have been busy. Up by more than 100% so far this year. Just an unbelievable rally. It's really quite extraordinary what's happening in Korean stocks at the moment. The KOSPI index, which tracks Korea's public companies, climbed 200% over the last 12 months.
Compare that to other major markets like the S&P or even the Nasdaq. And Korea's performance blows them out of the water. That means it has more than tripled over the past 12 months. Retail investors they've been the main driver of the KOSPI. We can see signs of being a little bit mania and a lot of people borrowing money to invest in stocks. And amid the mania is a mounting fear that a bubble will soon burst. The AI bubble debate is absolutely raging right now. South Korea is one of the biggest beneficiary of the global AI trade, because it has two of the world's largest memory chip makers. Korean stocks are really maximizing
being beneficiaries of the AI CapEx bubble. That's the amount of money that's pouring in around the world, but particularly in the US, from the mega cap stocks into building AI data centers. So, are South Korea's retail investors building towards the future. Or will they get wiped out? I don't have a strong insight of when it goes well, but when the AI bubble collapses, the pain in Korea is going to be extraordinary. AI investment is in hyperdrive. 2025 saw the four biggest US tech companies Amazon, Google, META and Microsoft spending $376 billion on capital expenditures, and the industry is on track to spend a whopping $725 billion in 2026. Data centers need memory chips,
specialized semiconductors that store and rapidly feed information to AI processes. The design and manufacture of these critical components is dominated by two Korean companies, Samsung Electronics and SK Hynix. The scale of gains we're seeing are really quite extraordinary. At points this year, Samsung has seen its stock rise 500%, while SK Hynix has surged more than 1,000%. In 2025, Taiwan's TSMC outperformed SK Hynix and Samsung, but this is expected to change, with TSMC being overtaken by its rivals. We're really seeing really incredible amounts of value produced. Korea is making real hard earnings. If you go to the streets in a cafe or bars in South Korea these days, you can
easily hear people talking about Samsung Electronics and SK Hynix. They usually talk about whether it's still not too late to buy the stock, whether one should buy more. Korea's booming AI fuelled market has produced big winners. Especially if you got an early. Because I work in the tech industry and I worked in AI company since 2017, so I believe in that future. I'm sitting on the position 1,300% of gain. That's incredible. Yeah, because I invest in the five years ago. A lot of people say KOSPI's market rally is driven by fundamental, but to a certain extent, we can see certain pockets of the market that are driven by sentiment, such as the fear of missing
out. In South Korea, there is expectation that a certain age, you want to have a good job, you want to own a house and then you want to start a family. Young people who feel like they're out of options to own a house are starting to invest in stocks so they can start to build wealth. 'Speaking Korean'
Jeon Sukjae, known as Shuka, is a well known social media personality or Finfluencer. He says the ants are just trying to get ahead. 'Speaking Korean' Investing in the stock market can be risky, especially if debt's part of the equation. Despite profiting from the market, this investor didn't want her face to be shown because she hadn't told her family about the scale of her investing or the leverage she'd taken on. 'Speaking Korean'
This investor has seen their portfolio value rise to around 655 thousand US dollars. A large part of her portfolio is made up of leveraged ETFs, investments designed to multiply daily returns. But they can also multiply losses. These are ETFs that offer two times or three times the return of the market, which are really great when it goes up but not so good when it collapses. Cheering this bullishness on is Korea's president Lee Jae Myung. He's encouraged the shift from investing in housing to financial markets. The former trader turned politician has enacted sweeping reforms, leveling the playing field for smaller shareholders and strengthening corporate accountability.
But if the market falls, his popularity could fall with it. There is definitely a risk of tying one's political success too deeply with the stock market performance, because South Korea has so many retail investors. Out of 51 million population, 14 million people are retail investors. The strong market performance definitely has a huge appeal to voters. The bubble here is not in Korean stocks. What happens is a bubble in the US means that the real-world beneficiaries are just making money hand over fist, as long as the AI CapEx bubble lasts. Which brings us back to AI spending. Any sign it's slowing down exposes South
Korea's market to volatility that could wipe-out investor wealth. That's because Samsung and SK Hynix make up more than 50% of the KOSPI. The Korean stock market trades like a penny stock or trades like an individual volatile stock. Because in many ways it is just two stocks. If the AI transformation doesn't return the profit they were expected to, and if there's any hiccups in the CapEx spending or some kind of a slowdown in the US big tech spending. South Korea might be the first in the world to witness what kind of impact that's going to have on the market. A recent study by Bain and Co. of nearly
a thousand global companies found high cost savings broadly fell short of projections. A result, the survey says, should be making executives uncomfortable. When this AI CapEx bubble burst, the Korean stock market will collapse and then the economy in Korea will suffer a deep recession. The problem is, is that I'm not trying to call the top, and I don't know where the top is. The risk is becoming apparent. South Korea's financial watchdog now says it regrets the launch of leveraged ETFs. On March 4th this year, the KOSPI plunged 12%, pulled down by concerns over the Middle East conflict. South Korea's ants,
those hoping AI will help them build generational wealth may be some of the most at risk. We are finding some balance between the hope and doom market scenario. Now, I'm looking for the China market as well. We know that the AI bubble cannot inflate ad infinitum. The problem is you can't get ahead of that story. If the AI CAPEX bubble continues for another year, Korean stocks will double or triple again. You can't really pre-empt the turn until you know exactly when the bubble will burst.
