Hedge funds target South Korean chipmakers amid AI demand surge

Hedge funds are increasingly investing in South Korean chipmakers, betting on a surge in demand for high-end memory chips driven by AI advancements and government support. Notable funds, including Britain’s Man Group and Singapore’s FengHe Fund Management, target giants like SK Hynix and Samsung Electronics, which have lagged behind the broader AI sector rally.

FengHe and other investors see SK Hynix as a key player in the AI market, given its significant supply of high-bandwidth memory (HBM) chips to Nvidia. Despite Hynix’s crucial role, its stock trades at a lower multiple than Taiwan’s TSMC, presenting a perceived value opportunity. Additionally, the South Korean government’s 26 trillion won support package for the chip industry and initiatives to enhance shareholder returns add to the appeal of these stocks.

The influx of hedge fund investment has bolstered the stock market in South Korea, with the KOSPI index achieving its best performance in seven months in June. South Korean stocks have attracted the highest inflows among Asian emerging markets this year, with Samsung and Hynix accounting for a significant portion of KOSPI’s market capitalisation. Despite Hynix’s substantial gains, Samsung is expected to catch up in the latter half of the year.

Beyond chipmakers, the AI boom is benefiting other South Korean industries. For instance, HD Hyundai Electric has seen a significant rise in share price, driven by increased power consumption from AI developments. The ongoing US-China technology conflict further ensures demand for South Korean advanced memory chips as Chinese manufacturers struggle under US export restrictions.