U.S. and Korean tech stocks are now tightly linked — and that could be a worry for investors
The 60-day correlation between the Kospi and Nasdaq 100 recently climbed to about 0.50, its highest level since 2021, according to data provided by Rayliant.
The closely linked fortunes of U.S. technology giants and South Korean memory chipmakers are becoming increasingly evident as artificial intelligence spending binds their fates together. The correlation between the Kospi Index and the Nasdaq 100 has reached a 60-day high of about 0.50, its highest since 2021, according to Rayliant data.
This surge in relationship can be attributed to the rising dominance of Samsung Electronics and SK Hynix, which together contribute more than half of the Kospi index. As the leading players in the AI hardware supply chain, these companies provide crucial memory chips for data centers operated by U.S. technology companies. Analysts emphasize that the correlation between the two markets is primarily driven by sentiment toward the AI hardware trade.
When AI-related developments occur during U.S. trading hours, Korean stocks like Samsung and SK Hynix can serve as proxies for investors' reactions upon the opening of the Nasdaq. However, while the correlation presents opportunities for investors, it also carries risks. The growing interdependence erodes the diversification benefits that investors typically seek by holding a mix of U.S. and Korean equities.
With half of the Kospi index tied to one cyclical theme - AI hardware - a slowdown in hyperscaler capex could disproportionately impact the Korean market compared to other global markets. Additionally, the highly volatile nature of Korean memory stocks compared to many U.S. chipmakers, driven by leveraged exchange-traded fund flows, adds to the risks.
While Micron, Samsung, and SK Hynix currently benefit from rising DRAM prices, potential future divergence may arise due to differences in capital expenditure, product mix, and U.S. support for domestic chip production. Furthermore, China's growing presence in the memory chip industry poses another risk, as Chinese producers have demonstrated technological progress that often exceeds expectations.
Written by urgent.news from CNBC World's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
