In August 2026, the global financial market is navigating a significant turning point, influenced by geopolitical crises in the Middle East, soaring long-term interest rates in the U.S., and ongoing debates over the valuation of the artificial intelligence (AI) industry. As leading stocks face volatility, global capital is rapidly seeking stable performance amid an unstable macroeconomic environment. The concerns over profitability in cloud AI, triggered by the U.S. stock market, and the resurgence of major semiconductor stocks in South Korea are key milestones that investors must consider in the second half of the year.
The attention foreign investors are giving to South Korean semiconductors is paradoxically linked to the formidable challenges facing the U.S. stock market. Wall Street currently identifies the relentless rise of U.S. long-term Treasury yields as the most critical threat to the AI rally.
The high interest rates particularly impact high-valuation AI technology stocks. Given the nature of growth stocks, which justify current prices by projecting future value, rising rates diminish the present value of future earnings.
A more significant issue is the soaring financing costs for hyperscalers, companies operating massive data centers, which must undertake substantial capital investments. In the past, these firms managed such costs with ample cash flow, but they are increasingly relying on external borrowing, such as bond issuance, making high long-term rates a financial burden.
As doubts about the profitability of cloud AI services grow in light of astronomical investment costs, Wall Street's capital is gradually shifting away from cloud AI towards 'on-device AI' centered around Apple, which has lower interest rate sensitivity and broader real-world applications, as well as financial stocks with attractive valuations.
Concerns regarding AI infrastructure investments in the U.S. often spill over into discussions about the 'peak-out theory' for South Korean semiconductors. Rumors suggest that Meta may reduce memory orders as it leases AI server infrastructure externally, and there are fears that Apple will adopt DRAM from China's Changxin Memory Technologies (CXMT) to cut costs.
However, these fears are unfounded. Reports indicate that Meta's long-term orders for chips and components are actually strengthening, and Apple's adoption of Chinese components is complicated by U.S. semiconductor technology export regulations and stringent delivery specifications.
Most importantly, the momentum for profit growth in South Korean semiconductors dispels all these concerns. The net profit of the KOSPI, driven by semiconductors, is expected to surge from 222 trillion won in 2025 to 759 trillion won in 2026, a staggering 242% increase year-on-year. The semiconductor sector's net profit is projected to skyrocket from 81 trillion won in 2025 to an astonishing 581 trillion won in 2026, representing a remarkable 614% growth. Considering that the profit growth rate for other sectors is around 27%, it is not an exaggeration to say that the advancement of the South Korean stock market relies entirely on semiconductors.
From a macroeconomic perspective, the South Korean won is expected to gradually stabilize after experiencing some turbulence in the second half of the year. Currently, the rise in international oil prices and the strong economic fundamentals of the U.S. are driving capital flows towards the U.S., reinforcing a strong dollar trend. As a result, the South Korean won, along with the Japanese yen, is facing significant depreciation pressure in the global market.
However, buoyed by a robust economic growth rate nearing 3% and the semiconductor supercycle, the current account surplus is expanding nearly twofold, with continuous inflows of funds into high-quality semiconductor American Depositary Receipts (ADRs) like SK Hynix. After absorbing temporary upward risks due to the prolonged war, the won-to-dollar exchange rate is expected to stabilize in the 1,400 won range from late this year into early 2027, creating a favorable environment for foreign capital.
In the past, during the dot-com bubble's collapse, vague anxieties about new technologies and concerns over investment excess shook the market, but ultimately, it was the proven performance of companies that revived leading stocks.
The current global asset allocation strategy in August 2026 is no different. The investment attractiveness of stocks still surpasses that of precious metals or bonds. With major political events like the U.S. midterm elections approaching, the administration is likely to gradually shift towards a more accommodative policy stance due to pressure on approval ratings. If geopolitical risks are resolved, global liquidity will likely surge once again.
While corrections in a rising market may feel increasingly deep and sharp, it is essential to remember that for high-quality stocks with stable performance, corrections always present the perfect buying opportunity for the next upswing.
* This article has been translated by AI.
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