S.Korea shares hit record high as chip stock rally offsets inflation worries

South Korea's KOSPI index surged over 3% to a new record high of 3,565.96, primarily driven by significant gains in chipmakers Samsung Electronics and SK Hynix. Both companies saw shares climb after securing letters of intent to supply memory chips to OpenAI for its Stargate program and collaborate on building data centers in South Korea. This market rally occurred despite a rebound in September's consumer inflation to 2.1% year-on-year, which analysts anticipate will not alter the Bank of Korea's current policy easing stance.

Analysis

South Korea's KOSPI index surged over 3% to a new record of 3,565.96, primarily propelled by a powerful rally in the semiconductor sector. Shares of Samsung Electronics rose 5% to their highest point since January 2021, and SK Hynix Inc. soared over 12% to an all-time high. The direct catalyst for this movement was the announcement that both firms signed letters of intent to supply high-demand memory chips to OpenAI for its Stargate AI program, in addition to collaborating on the construction of two new data centers in South Korea. This significant, company-specific news overshadowed concurrent macroeconomic data showing an acceleration in consumer inflation. The September consumer price index (CPI) rose 2.1% year-on-year, slightly above the 2.0% forecast, and rebounded 0.5% on a monthly basis. However, according to ING analysts, this inflation uptick is not expected to provoke a shift in the Bank of Korea's current policy easing stance, allowing investor focus to remain squarely on the long-term growth narrative tied to the AI infrastructure build-out.

Key Decisions for Investors

• Investors should view the OpenAI agreement as a material catalyst validating Samsung and SK Hynix's critical roles in the AI supply chain, potentially justifying an increased weighting in the South Korean semiconductor sector.
• While the market has shrugged off the recent inflation data, it remains a key risk factor to monitor; any future signs that the Bank of Korea may reconsider its easing policy in response to persistent inflation could temper the current bullish sentiment.
• Given the powerful stock reactions, particularly SK Hynix's 12% surge, investors should assess whether the positive long-term impact of the OpenAI partnership is fully priced in or if there is further potential for upside.