South Korean stocks nudged higher on Tuesday, with the benchmark KOSPI index rising 0.36%, as local chipmakers joined a broader tech rally that began on Wall Street. But the mood remained cautious, with investors keeping one eye on reports that Nvidia's board could consider moving against its chief executive, Jensen Huang.
The gains were led by Samsung Electronics, which climbed 2.55%, and SK Hynix, which added 0.47%. Both companies are major suppliers of memory chips used in artificial intelligence (AI) data centers, making them sensitive to shifts in the global AI trade. Meanwhile, more economically sensitive automakers like Hyundai Motor and Kia slipped, reflecting a mixed session beneath the surface.
What's behind the move?
The KOSPI's advance came after a strong session for US technology shares, which lifted sentiment across Asian markets. Investors often look to US tech as a barometer for global risk appetite, and South Korea's chip-heavy index tends to move in tandem with that sector.
However, the rally was tempered by a Reuters report suggesting that Nvidia's board could consider action against CEO Jensen Huang. The report, which cited unnamed sources, added to a backdrop of uncertainty surrounding the company that has become the face of the AI boom. Nvidia's chips are the backbone of many AI systems, and its fortunes are closely watched by investors worldwide, including those in South Korea.
“The AI trade is still the dominant theme, but leadership can change quickly,” said one Seoul-based analyst, speaking on condition of anonymity. “Any sign of instability at Nvidia can ripple through suppliers and competitors alike.”
At home, the South Korean won strengthened against the US dollar, a sign that foreign investors were not fleeing the market despite the cautious tone. A firmer currency can also help ease inflationary pressures, though it can weigh on exporters' competitiveness.
Why Nvidia matters to South Korean stocks
Nvidia's influence extends far beyond its own share price. The company designs the graphics processing units (GPUs) that power AI training and inference, and it relies on a complex supply chain that includes South Korean firms. Samsung Electronics and SK Hynix both produce high-bandwidth memory (HBM) chips that are critical components in Nvidia's AI accelerators.
As a result, any disruption at Nvidia—whether from leadership turmoil, export restrictions, or a slowdown in AI spending—can have knock-on effects for these suppliers. Investors in South Korea often watch Nvidia's stock price as a proxy for the health of the AI trade, and any negative headlines can quickly dampen local sentiment.
The reports of a possible board move against Huang come at a time when Nvidia is already facing scrutiny over export rules and concerns about AI spending sustainability. Baird recently cut its price target on Nvidia, citing those very issues. Such developments highlight the fragility of the AI trade, which has driven much of the market's gains over the past year.
What it means for investors
For everyday investors, the KOSPI's modest rise is a reminder that markets can move higher even when underlying risks remain. The chip sector's strength suggests that demand for AI-related components is still robust, but the Nvidia report serves as a cautionary note.
“Investors should not assume that the AI trade is immune to leadership changes or regulatory headwinds,” said the analyst. “Diversification across sectors and regions remains important.”
South Korea's market is heavily weighted toward technology and autos, so it can be more volatile than broader indices. The won's strength is a positive sign for foreign investors, but it could also pressure exporters' earnings if it persists.
Looking ahead, market participants will likely keep a close watch on any official statements from Nvidia's board, as well as upcoming earnings from major chipmakers. The tech rebound on Wall Street may continue, but the leadership risk at Nvidia is a wildcard that could shift sentiment quickly.
For now, the KOSPI's gains show that investors are willing to look past the headlines, at least for a day. But the underlying uncertainty around the AI trade is unlikely to disappear soon.
