South Korea is solidifying its place as the world's hottest stock market, riding a record-breaking surge in memory chip profits fueled by relentless demand for AI infrastructure.
But as the rally accelerates, veteran economist Ed Yardeni sees a risk: it may all be too easy.
The iShares MSCI South Korea ETF(NYSE:EWY) has climbed 25% year-to-date through Feb. 3, following an astonishing 87% return in 2025 — the best among all global country ETFs.
That performance leaves the SPDR S&P 500 ETF Trust(NYSE:SPY) in the dust, with U.S. equities up just 0.5% this year.
In a note shared Tuesday, Yardeni said the artificial intelligence boom has been very good to South Korea's broader economy.
The South Korean rally has been driven by Samsung Electronics and SK Hynix, the world's most important suppliers of memory chips essential to NvidiaCorp.’s (NASDAQ:NVDA) AI accelerators and the broader data-center buildout.
Samsung's shares are up 196% in the past 12 months, while SK Hynix exploded 329% higher.
Together, these two memory chip giants make up nearly half of the total weighting in the iShares MSCI South Korea ETF.
Samsung's fourth-quarter earnings underscored the magnitude of this momentum.
Operating profit more than tripled to 20 trillion won ($13.7 billion), and revenue climbed 23% to a record 93 trillion won ($63.7 billion), driven by surging memory chip prices linked to artificial intelligence deployments in data centers and high-performance systems.
The Kospi index recently topped the 5,000 mark for the first time in history — a symbolic win for President Lee Jae Myung, who campaigned last year on a pledge to double the index's market cap from its April 2025 level of 2,488. Less than a year into his term, that target has been met.
Can The South-Korea AI Boom Now Backfire?
Yardeni believes the AI gold rush may be making things a bit too easy for the country dubbed "Samsung Nation."
Yardeni warns that soaring valuations and near-term profitability may distract investors and policymakers from addressing long-standing structural weaknesses — especially corporate governance and economic concentration.
"Short-term wins — such as the global AI trade — distract leaders from addressing longer-term challenges," Yardeni said.
A case in point: Samsung's own supply-side stress. In September, the company raised prices on its DR5 memory modules by 60%, from $149 to $239, citing overwhelming demand.
As Samsung and others pivot more heavily toward high-bandwidth chips tailored for AI, legacy DRAM supplies — used in PCs and industrial gear — are thinning out, pushing costs higher across the hardware ecosystem.
Yardeni also flags geopolitical storm clouds on the horizon.
The Trump administration is threatening a 25% tariff on South Korean exports, citing delays in finalizing a 15% bilateral trade deal and unmet U.S. expectations, including a $35 billion "signing bonus."
That's a serious concern for a trade-reliant economy already caught in the crossfire of U.S.–China tensions.
Korea is balancing a $17 billion chip plant investment in Texas with substantial manufacturing operations in China — where export restrictions and rising competition are both intensifying.
Samsung Chairman Lee Jae-yong recently revisited his late father's 2007 warning about Korea's "sandwich crisis," in which the nation risks being squeezed between high-tech Japan and low-cost China.
Now, Yardeni argues, the pressure is even greater, with added layers from U.S. tariffs and China's rapidly closing tech gap.
For now, the AI boom has made the gains look remarkably easy for South Korea — cementing its status as the world's best-performing equity market.
The harder test may come later. When the AI cycle turns, investors will find out whether "Samsung Nation" has used this windfall to strengthen its foundations — or merely ridden the wave while it lasted.
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