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Macroscope
How the AI chip boom has made South Korea a victim of its own success
While tech giants are driving South Korea’s stock market higher, the country’s currency is struggling and foreign investors are pulling out
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Nicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm.
For a sign of how the fierce demand for memory chips triggered by the boom in artificial intelligence (AI) is benefiting technology-driven economies, look no further than South Korea.
Last month, exports from Asia’s fourth-largest economy grew at a blistering rate of 53 per cent in annualised terms, the fastest pace since 1984. Shipments of semiconductors, which are used to store and funnel the huge amounts of data for AI services, increased nearly 170 per cent to a record monthly high of US$37.1 billion.
The continued upswing in the semiconductor cycle caused Bank of America to up its forecast for South Korea’s current account surplus this year to 15 per cent of economic output. In a report on June 2, Barclays said, “The most popular AI trade for 2026, for a global allocator, has been Korea or Taiwan – the world’s (and Asia’s) two best-performing major markets.”
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Since the start of this year, the Kospi, South Korea’s main equity index, has risen 109 per cent. Last month, the market valuations of Samsung Electronics and SK Hynix, the country’s two semiconductor giants, rose above US$1 trillion as investors bet on sustained demand for memory chips and computing capacity.
The potent combination of a massive current account surplus, dominance in semiconductors amid a global chip shortage and Asia’s best-performing stock market ought to be a boon for the won. Even so, South Korea’s currency is down about 11 per cent against the US dollar in the past year, leaving it at its weakest level since the 2008 global financial crisis.
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The striking disconnect between the AI-driven chip boom and the steep decline in the won is attributable to several factors. South Korea relies heavily on imports of oil and gas. The global energy shock has increased demand for US dollars to pay for these imports, putting the won under pressure.
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