South Korea's benchmark KOSPI index staged a sharp rebound on Friday, climbing 4.28% as heavyweight chip stocks Samsung Electronics and SK Hynix rallied on deal speculation. However, the bounce was not enough to erase the week's losses, and the index logged its second straight weekly decline as investor enthusiasm for artificial intelligence cooled.
What drove the rally?
The main catalyst was a report that AI startup Anthropic is in discussions with Samsung Electronics about a partnership to develop a custom AI chip. Samsung shares surged 8.57% on the news, while SK Hynix, a key supplier of high-bandwidth memory chips used in AI systems, rose 7.18%. The move follows a broader sell-off in global tech stocks earlier in the week, which had hit South Korea's chip-heavy market particularly hard.
For context, Samsung and SK Hynix together account for a large portion of the KOSPI's weighting, so moves in these stocks have an outsized impact on the index. The rally on Friday looked more like a relief bounce than a clean reset, as investors snapped up beaten-down shares on the back of the Anthropic news.
Why the weekly loss matters
Despite Friday's jump, the KOSPI still ended the week lower, extending its losing streak to two weeks. The decline reflects growing doubts about whether the AI boom can sustain its rapid pace of growth. Earlier in the week, the index had plunged 6% after Meta's cloud plans sparked fears of weaker AI chip demand, as we covered in KOSPI Plunges 6% as Meta's Cloud Plans Spark AI Chip Demand Fears.
Foreign investors remained net sellers of Korean stocks on Friday, a sign that international money is still cautious on the market. The South Korean won also weakened against the US dollar, adding to the headwinds for the export-dependent economy. A weaker won makes imports more expensive but can help exporters like Samsung and SK Hynix by making their products cheaper abroad.
What it means for investors
For everyday investors, the KOSPI's wild swings highlight the risks of concentrating too heavily in a single theme like AI. While the sector has delivered huge gains over the past year, it is also prone to sharp reversals when sentiment shifts. The recent volatility in South Korean chip stocks is a reminder that even the most promising technologies can face periods of doubt.
Investors should also keep an eye on the broader economic backdrop. The won's weakness and foreign selling suggest that global investors are not yet convinced that the AI trade is a sure bet. Meanwhile, the partnership talks between Samsung and Anthropic, which we explored in Anthropic Explores Custom AI Chip, Hires OpenAI Veteran, Talks with Samsung, could provide a longer-term catalyst if a deal materializes.
What to watch next
Looking ahead, the key question is whether the AI chip demand story can regain its footing. Investors will be watching for any updates from Samsung and SK Hynix on their AI-related orders, as well as broader market signals from the US and China. The KOSPI's ability to hold above recent support levels will also be important.
For now, the market remains in a wait-and-see mode. Friday's rally was a welcome relief, but it does not erase the underlying concerns about AI valuations and the pace of earnings growth. As always, diversification and a long-term perspective are the best tools for navigating such choppy waters.
