Samsung Electronics Co. (OTC:SSNLF) and SK Hynix have more than doubled in 2026 as the AI boom drives South Korea’s stock market higher, but economist Kim Young-ik is warning that the rally may be approaching a turning point.
SK Hynix Inc – ADR (NASDAQ:SKHY) made its Nasdaq debut under the ticker SKHY on July 10 this year, raising $26.5 billion through its ADR offering.
Korea’s ‘Dr. Doom’ Turns Bearish on KOSPI
Kim, an adjunct professor at Hanyang University’s Future Talent Research Institute, acknowledged that his earlier bearish forecast for Korean stocks was wrong, saying stronger-than-expected nominal GDP growth led to his miscalculation, The Chosun Daily reported on Sunday.
However, he now believes the market has moved from undervalued to overvalued.
"The stock market has devolved into speculation rather than investment," Kim said on Chosun Money, pointing to elevated return expectations and increasing use of leverage among investors.
Leading Economic Indicator Raises Red Flags
Kim’s bearish outlook is based largely on South Korea’s leading index cyclical variation, which is designed to signal economic turning points several months ahead.
He said the indicator continued rising through the first half of 2026 but peaked in June and has since started declining.
"The leading index’s drop—a more accurate predictor than KOSPI forecasts—is a clear signal of an impending stock price decline," Kim said.
He also cited slowing export growth as another warning sign for South Korea’s economy.
AI Boom, Leverage Could Create Bigger Risks
Kim said excessive optimism surrounding AI could become a broader financial risk if companies that have attracted substantial capital fail to generate enough profits to justify those investments.
He compared the current environment with previous bubbles, including the dot-com boom, arguing that transformative technologies can still produce destructive investment bubbles.
"Every bubble is met with the belief that ‘this time is different,’ but history has never been different," Kim said.
Kim expects the KOSPI to enter a downtrend through the first half of next year, although he said temporary rebounds remain possible. He also warned that the index could potentially fall below 5,000 if the downturn intensifies.
KOSPI Plunges 22.18% In July As AI Trade Unwinds
In July, the KOSPI tumbled 22.18%, its steepest monthly decline since the 2008 global financial crisis, as retail investors unwound leveraged positions and concerns over slowing hyperscaler spending highlighted the crowded AI trade.
Despite this, Samsung Electronics has gained 113.62% and SK Hynix 142.98% year to date, fueled by strong expectations for AI and semiconductor demand.
As of Friday, the KOSPI closed at 6,977.94, up 61.92% year to date and 119.62% over the past year.
Benzinga Edge ranks SK Hynix in the 98th percentile for Growth, with the stock maintaining a positive price trend across the short, medium and long term.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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