TSMC, Samsung, SK Hynix’s growth on Taiwan and South Korean markets

As South Korea’s and Taiwan’s benchmark indexes surged to record highs this year — powered by Asia’s trillion-dollar titans — it has raised concerns that their rallies are becoming dangerously dependent on a handful of artificial intelligence winners.

South Korea’s Kospi index has surged more than 80% this year, hitting one fresh high after another, while Taiwan’s Taiex has also repeatedly posted new records as investors piled into the semiconductor trade at the center of the AI boom.

“In a word, it’s the AI hardware theme that’s clearly what is propelling things,” Goldman Sachs strategist Tim Moe told CNBC.

Taiwan is “well over 80%” exposed to AI-related revenue streams while South Korea stands around 60%, he said, as soaring demand for memory chips and advanced semiconductors fuels an unprecedented earnings boom.

The concentration is staggering. Taiwan Semiconductor Manufacturing Company, which has a market cap of around 58 trillion Taiwan dollars ($1.85 trillion), now accounts for more than 40% of Taiwan’s benchmark Taiex index, according to UOB. 

In South Korea, Samsung Electronics and SK Hynix together made up a record 42.2% of the Kospi in May, according to Manulife Investment Management. Samsung Electronics’ market capitalization pushed past $1 trillion last week as investors continued to chase AI-linked stocks. 

The concentration has made both markets highly exposed to the global AI spending cycle. But it also means index-level gains may say less about broad domestic strength than about the earnings power of a narrow group of exporters.

Analysts warned that reliance on a narrow group of exporters could amplify volatility and leave markets vulnerable to shocks ranging from geopolitical tensions to a slowdown in data-center spending.

“There certainly is risk with market concentration,” Goldman’s Moe said, pointing to vulnerabilities ranging from supply disruptions and political backlash against AI infrastructure to capital-market stress and technological disruption from new chip designs.

One immediate risk stems from the AI supply chain itself. Taiwan and South Korea sit at the heart of a manufacturing ecosystem reliant on specialized chemicals, light-sensitive films known as photoresists and gases that could be affected during geopolitical tensions or disruptions to global shipping routes.

“If you just can’t get them, and therefore you have to stop your production, it would not take a genius to think that the stocks would correct,” Moe said.

Additionally, Taiwan and Korea are large…