South Korea’s AI Chip Rally: Retirees Drive EWY Surge Amid HBM Demand

The 40% surge in the iShares MSCI South Korea ETF (EWY) marks a significant turning point for the South Korean equity market, traditionally known for its 'Korea Discount' or persistent undervaluation. This rally is being fueled by a global obsession with artificial intelligence, specifically the hardware required to power large language models. While institutional investors have long been the primary drivers of such shifts, a new and surprising demographic is entering the fray: retirees. This group, typically focused on capital preservation and dividend income, is increasingly pivoting toward growth-oriented bets on South Korea’s semiconductor recovery, viewing the current cycle as a generational opportunity.

At the heart of this surge is the High Bandwidth Memory (HBM) market. South Korea’s two semiconductor titans, Samsung Electronics and SK Hynix, control the vast majority of the global supply of HBM. These chips are essential for NVIDIA’s AI accelerators, acting as the high-speed data conduit that allows GPUs to process massive datasets. As NVIDIA’s dominance continues, the secondary beneficiaries in the supply chain—the Korean memory makers—are seeing their valuations re-rated. The EWY ETF, which allocates nearly 30% of its weight to these two companies, has become the primary vehicle for international investors to gain exposure to this specific niche of the AI trade, offering a diversified entry point into the KOSPI’s heavyweights.

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The 40% surge in the iShares MSCI South Korea ETF (EWY) marks a significant turning point for the South Korean equity market, traditionally known for its 'Korea Discount' or persistent undervaluation.

The influx of retiree capital into a historically volatile emerging market ETF suggests a broader shift in investor sentiment. Retirees may be viewing the AI revolution not as a speculative bubble, but as a structural shift in the global economy that warrants a departure from traditional 60/40 portfolio allocations. Furthermore, the South Korean government’s 'Corporate Value Up' program, aimed at improving shareholder returns and governance, is providing a supportive backdrop. This regulatory push, combined with the AI-driven earnings recovery, is making Korean equities more attractive to a wider range of retail investors who were previously wary of the market's cyclicality and governance issues.