Hedge Funds Rush into South Korean Chipmakers for AI-Related Stock Market Bargains

Hedge funds are flocking to South Korea’s chipmakers in search of artificial intelligence-related stock market bargains, as demand for high-end memory chips continues to rise. Companies like SK Hynix and Samsung Electronics are attracting attention from hedge funds like Britain’s Man Group, Singapore’s FengHe Fund Management, and Hong Kong’s CloudAlpha Capital Management and East Eagle Asset Management.

Matt Hu, chief investment officer of FengHe, likened Hynix to the “queen” of the AI story, highlighting the company’s importance in the sector. Despite the recent surge in AI-related stocks like Nvidia, South Korean chipmakers have lagged behind, presenting an opportunity for investors.

The South Korean government’s support package for the chip industry, along with initiatives to improve shareholder returns, has further bolstered the appeal of investing in companies like Hynix and Samsung. The rush of hedge fund cash into South Korea’s AI sector has helped boost the KOSPI index, with South Korean stocks attracting strong inflows this year.

In addition to HBM chips, scarcity in the supply of broader memory chips has also benefited South Korean suppliers. Samsung recently announced a significant rise in its second-quarter operating profit, thanks to increasing chip prices.

Investors like Sumant Wahi of Man Group see potential in traditional DRAM chips as well, as the industry shifts capacity to manufacturing HBM. Pierre Hoebrechts of East Eagle Asset Management expects Samsung to catch up in the second half of the year, following its underperformance compared to TSMC.

The South Korean AI theme is expanding beyond chipmakers, with companies like HD Hyundai Electric seeing significant gains in their stock prices. The growing AI ecosystem in Korea presents opportunities for semiconductor equipment, cooling systems, and consumer electronics.

Despite risks like a depreciating Korean won and restrictions on short-selling, hedge funds believe that the rewards of investing in South Korea outweigh the challenges. The long-running Sino-U.S. technology war also ensures continued demand for South Korea’s advanced memory chips from Chinese companies.

Overall, the influx of hedge fund cash into South Korea’s AI sector signals a growing interest in the country’s chipmakers and the potential for further growth in the industry.