Foreign Investors Exit South Korean Stocks as AI Enthusiasm Fades

South Korean equities are finding it difficult to draw buyers as excitement around artificial intelligence investments cools, leading to substantial foreign selling and a marked slump in trading volume.

According to Bloomberg, turnover in South Korea’s $4.3 trillion stock market has dropped 70% from its peak in late May, while the benchmark Kospi has declined 22% during the second half of 2026.

This pullback comes after a first-half advance that turned the Kospi into the top-performing major equity gauge worldwide, largely powered by demand for AI memory chips.

Samsung Electronics and SK Hynix, which jointly represent more than half of the index’s weight, have turned into a weak spot as investors doubt whether the semiconductor upcycle can be sustained.

Exchange data compiled by Bloomberg shows foreign investors have pulled $131 billion out of Korean equities this year, the biggest outflow among major Asian markets.

Worries about demand were on display Thursday when Samsung shares fell even though the company reported quarterly operating profit that rose nearly ninefold.

Corporate buybacks are providing less support to the market as well. Samsung and SK Hynix are nearing the end of combined repurchase programmes valued at 55 trillion won, or $41 billion.

Retail investors have also stepped back after the selloff in July.

Outstanding margin loans have declined to about 33 trillion won from a June high of 38.6 trillion won, and brokerage deposits have fallen to roughly 100 trillion won from close to 140 trillion won.

Investors are showing growing preference for Taiwan, where the technology sector provides wider exposure to the AI supply chain.

Taiwan’s Taiex has risen 70% this year and beat the Kospi by roughly 23 percentage points in the last quarter.

UBS Global Wealth Management said it favours Taiwanese equities for tactical AI exposure, pointing to the market’s diversified technology hardware ecosystem and heavy capital spending by major technology firms.

Even after the decline, South Korea remains one of 2026’s better-performing markets overall, helped by earlier gains and expectations that AI infrastructure investment will continue.