Dissecting the wildest stock market in the world in 2025: AI, storage, and defense drive South Korea's Kospi index to soar over 76%.

The unprecedented "renaissance rally" of the South Korean stock market in 2025 can be described as a landmark event in the history of global financial markets, with the country's stock market poised for its strongest surge in 25 years. In 2025, the "crushing level" surge of storage chip giants and defense exporters, as well as the astonishing rise of AI and K-Beauty concept stocks, have provided South Korean investors and foreign funds focused on Korea with incredibly strong returns in a stock market that continues to hit new historical highs. The strong surge contributed by these popular sectors has driven the benchmark stock index of the South Korean stock market, the Kospi Composite Index, to rise by over 76% year-to-date, making it the best-performing major stock index in the world in 2025. The two major storage chip giants with a weightage of up to 30% in the benchmark stock index in the South Korean stock market, Samsung Electronics and SK Hynix, contributed nearly half of the surge, while the South Korean defense and nuclear energy companies were also major contributors to the surge. Furthermore, Wall Street analysts believe that the South Korean stock market still has strong upside potential, with top Wall Street brokerages such as Citi Group, JPMorgan Chase, and Nomura predicting that the South Korean benchmark stock index will rise by at least another 20% next year. Analysts add that the South Korean government's stimulus measures, combined with strong profit growth, are expected to continue to support the South Korean stock market's "bull market trajectory". As shown in the chart above, the "K-Rally" of the South Korean stock market has swept the world - the Kospi index has continued to rise at an astonishing pace. South Korean President Lee Jae-myung even predicted recently that the South Korean stock market would soon surpass the 5000-point milestone. As of the close of trading on Monday, the South Korean Kospi index closed at 4220 points. If the strong uptrend continues in early trading on Tuesday, the South Korean stock market will set a new historical high. The following is a review of the winners and losers in the South Korean stock market in 2025. AI Investment Theme In the South Korean stock market, the biggest winners in artificial intelligence investment themes are not traditional chip manufacturers or major chip stocks like Samsung, but rather industrial stocks labeled with AI. These include South Korean power transformer manufacturer Hwaseung Heavy Industries, and nuclear power supplier Doosan Enerbility. According to price statistics from the Korea Exchange, the prices of both of these stocks have risen by over 330% this year. Despite high valuations, the bulls of these two stocks generally believe that these power-type companies are essential due to the surge in electricity demand brought about by the increasing number of AI data centers worldwide, and there are no rapid and feasible carbon-free alternative solutions available. The essence of the global AI competition is the competition for AI computing power infrastructure, and the core basis that drives AI computing clusters is a stable and massive electricity supply system. As a result, the energy demand of AI data centers is skyrocketing at an unprecedented rate due to the exponential growth in power-hungry AI data centers such as AI chips and other computing infrastructure. The emergence of high-energy-consuming AI data centers that have begun to expand exponentially, particularly in the industry, behind the surge in demand for AI chips and other computing infrastructure such as enterprise-level SSDs and high-performance networks and power equipment, is tied to the core of power supply, and this is also the origin of the market view that "AI's end is electricity". Goldman Sachs recently raised its forecast for the significant electricity demand driven by global data centers until 2030, revising it up to a 175% expansion from the previous prediction of +165% by 2023, roughly equivalent to the additional electricity resource burden of a "top ten power consumer in the world". According to the strategy analysts at Goldman Sachs, the end goal of large AI models is power - they point out that the AI, which they describe as a "power devourer", will lead to an unprecedented global demand for electricity and a super bull market for electricity stocks. In his first budget speech in November, South Korean President Lee Jae-myung placed artificial intelligence at the core of his government's economic vision and pledged to completely transform the country's core industries, public services, and defense industry through massive AI investments and policy support, striving to integrate everything in the country with AI. President Lee Jae-myung emphasized that the South Korean government will increase AI investment to over 101 trillion Korean won (approximately $70 billion) next year, more than three times the current amount, as part of a 728 trillion won overall budget proposal, with the goal of revitalizing South Korea's economic growth, overcoming the decline in the country's population structure, and preparing fully for the wave of global trade and technological upheaval. The analyst team from Morgan Stanley predicts that investor interest in grid and AI computing infrastructure stocks will continue throughout 2026. They emphasize that Hyundai Motor Company is entering a "revaluation wave that may last for decades in the midst of grid modernization, AI data centers, and decarbonization". Leader in Storage Chips Samsung Electronics and SK Hynix have experienced one of the strongest years, solidifying their absolute leadership position as the largest two weight stocks in the Kospi and global top-tier storage chip manufacturers. Driven by the growth in demand for AI training/inference systems specialized in high-capacity, high-performance storage chips from global tech giants including Microsoft, Google, and Meta, Samsung's stock price has risen by 125% this year, reaching new historical highs. SK Hynix's stock price has also risen by approximately 268%, similarly reaching new historical highs this year. Storage chips are crucial for South Korea's exports and economy. South Korea is home to the two largest storage chip manufacturers in the world - SK Hynix and Samsung, with SK Hynix being the long-term and core HBM supplier for NVIDIA's AI GPU computing clusters. Another storage giant, Samsung, is one of the world's largest tech companies and the largest supplier of consumer-grade DRAM and NAND storage chips, as well as enterprise-grade NAND storage components, and has recently become the supplier of HBM storage systems for NVIDIA's flagship AI computing cluster products - the GB200/GB300 series. As breakthrough AI applications like AI intelligent bodies penetrate various industries globally and bring about huge "AI inference endpoint computing power demand", the future prospects of AI computing infrastructure construction areas such as AI chips, HBM storage systems, enterprise-level SSDs, high-performance networks, and power equipment are still vast, AI will bring an unprecedented global demand for electricity and a super bull market for electricity stocks. Additionally, the recent surge in demand for DRAM/NAND series storage products is being driven by the global expansion of AI training/inference computing power, as well as the recovery in demand for consumer-grade DRAM and NAND storage due to the end-side AI boom. A recent study by Nomura Securities on the storage chip industry indicates that the "super storage cycle" that began in the second half of this year will last until at least 2027, with significant additional supply not expected to appear until the early 2028. Nomura has further raised the 12-month target stock price for the two "South Korean storage chip giants", emphasizing that these two giants, whose stock prices continue to hit new highs, are expected to have a further upside potential of over 40%. In recent months, the incredibly strong performance of the three major storage chip giants - Samsung Electronics, SK Hynix, and Micron, as well as storage giants such as Western Digital and Seagate, has led financial giants such as Nomura, JPMorgan Chase, and Morgan Stanley to declare that a "storage super cycle" has begun, highlighting the continued surge in demand for AI training/inference computing power and the recovery of consumer electronics demand driven by the end-side AI boom, which has led to exponential growth in demand for DRAM/NAND series storage products, particularly in the HBM storage and server-level high-performance DDR5 sections dominated by Samsung, Hynix, and Micron. Additionally, the demand for enterprise-level SSDs in the NAND sector has recently shown a sharp upward trend. In the South Korean market, the momentum of the strong surge in storage chips has also spilled over to related companies, such as SK Square, the holding company of SK Hynix, as well as Korea Circuit, which is seen as a customer by the US-based AI ASIC leader Broadcom. Both of these stocks have also risen by over 330% this year. "There is no doubt that there is a shortage of storage chips being accelerated, so I expect South Korean semiconductor stocks to continue to have an extremely strong year," said Kang Dajun, Chief Investment Officer of Seoul Life Asset Management. Defense Military Industry Stars US President Donald Trump's reshaping of traditional security alliances has significantly spurred new defense military spending in both Europe and Asia this year, prompting investors to refocus on South Korean contractors known for faster delivery and lower deployment costs. The surge in defense military stocks has swept the global stock market this year, with Citigroup recently releasing a research report stating that the trend of "International Rearmament" will become a structural and multi-year global defense military demand mainline, predicting that the international stock market's defense sector will continue to be a hot investment sector in the next 2-3 years and is expected to be a core contributor to driving stock market growth. The latest statistics show that the surge in defense military investments has engulfed the stock market, with aerospace and defense stocks in the US rising by as much as 36% in 2025, while the similar stock category in European markets has surged by 55% year-to-date, even surpassing core driving sectors of the US market such as semiconductor stocks, which have seen an increase of about 45%, mainly due to Germany and the entire European continent looking to rearm Europe after Trump's announcement to focus entirely on US domestic defense construction. In the South Korean stock market, Hanwha Aerospace, the manufacturer of the K9 self-propelled artillery, has become one of the biggest winners in the South Korean defense industry sector, with its stock price rising by nearly 200% this year. Some large shipbuilders with a defense focus, such as Hanwha Marine, have also seen an increase of 210%. Must Asset Management stated that given the breakthrough in large-scale orders recently achieved by South Korean local companies in Europe, these companies are likely to establish more and deeper cooperation partnerships with NATO member countries in the coming years. Leader of the K-Beauty New Generation Having gone public in the South Korean stock market for less than two years, APR Corp.'s market value has surpassed that of South Korea's old-school beauty giants Amorepacific Corp. and LG H&H. The leading brand manufacturer of Medicube, which has risen by 369%, APR Corp., is leading all sectors in the MSCI Korea Index, outperforming the entire benchmark index and is considered a super dark horse in the South Korean K-Beauty sector. "In my opinion, APR's exceptional performance is not just better execution, but playing a completely different game," said Jung In Yun, CEO of Fibonacci Asset Management Global in Singapore. "What it sells through social-first channels is the actual effect and user experience, rather than just selling skincare products through traditional retail channels." LG H&H, the owner of "The Whoo" skincare brand, is heading towards five consecutive years of declining stock prices, while the beauty giant Amorepacific Corp.'s stock price has risen by 14% this year. Investors generally have high expectations for APR to continue outperforming the benchmark beauty sector and the entire South Korean stock market benchmark index, but its high valuation also makes the stock more prone to significant fluctuations in the event of setbacks. Gaming Losers Although the South Korean market is generally bullish, South Korean game developers' stock prices have been significantly lagging behind the market, a rare occurrence. Krafton's market value has shrunk by about one-fifth, while Com2uS has fallen by over one-third. Concerns that their overall attractiveness in the Asian market is limited and cannot compete fiercely with Chinese rivals have forced investors to look elsewhere. Investment managers from Life Asset suggest that with the limited demand for South Korean role-playing games in Asia, there is still limited upside in their stock prices in the future. Other significant losers in the South Korean stock market in 2025 include many South Korean electric vehicle industry chain companies that have been severely impacted by the sharp drop in global electric car demand. One of the biggest losers is Enchem, a South Korean battery supplier, whose stock price has fallen by about 50% this year. SK Innovation, another of South Korea's top three battery suppliers, is also expected to close the year with a slight decline overall.