The KOSPI Bubble

Semiconductor chip companies have been benefiting from strong momentum and a powerful narrative. For instance, memory chip producers like Micron, AMD, and Intel have risen by 192%, 138%, and 166%, respectively, year to date.

While they provided a nice boost to the Nasdaq and an impressive, albeit lesser, tailwind to the S&P 500, the impact of Korean chipmakers on the Korean Composite Stock Price Index (KOSPI) has been stunning.

Consider the graph below, showing that the KOSPI has grossly outperformed the Nasdaq over the last three years. Incredibly, most of the KOSPI gains have occurred over the last year. Since the beginning of 2026 alone, the index has surged more than 88%. The KOSPI is now up over 200% in the last two years.

The reason for its parabolic ascent is twofold. As of June 30, 2026, Samsung Electronics and SK Hynix (NASDAQ:SKHY) together account for nearly 60% of the KOSPI, up from roughly 40% just two years ago. For context, Nvidia and Apple combined account for only about 20% of the Nasdaq.

The concentration carries serious risks. One such risk is regulatory. Goldman Sachs warns that if the combined KOSPI weight rises by just one more percentage point, foreign institutional investors subject to US Investment Company Act diversification rules will be forced to sell.

The KOSPI is no longer a gauge of South Korea or its financial markets. It is a bet on the global AI infrastructure buildout, packaged as a country index.

Fed Speakers

Chair Kevin Warsh delivers the semiannual monetary policy testimony before the House Financial Services Committee at 10:00 a.m. ET, roughly 90 minutes after the CPI print. His debut testimony as Chair, with the Senate Banking hearing to follow on July 15. The Fed is not yet in its pre-FOMC blackout.

Breadth Improves Post Quarter End

The Heat Map below, courtesy of FinViz, shows that last week was very mixed, with much divergence within sectors. For instance, in the communications sector, Meta was up double digits while Google fell by 2.5%. Similarly, NVDA and AVGO led the semiconductor sector higher by over 5%, while many of the recent chip outperformers, such as MU and INTC, performed poorly. As a result, the market’s breadth improved, with recent outperformers now underperforming and vice versa.

The second graphic from our soon-to-be-released new version of SimpleVisor shows that the sectors are clustered around fair value. Our new dispersion index, which measures breadth, is relatively low, signaling a healthy market. However, while the sectors show lower dispersion relative to each other, there is still considerable dispersion within some sectors.

The third graphic shows that the factors are even more clustered, again signaling that market breadth has improved significantly. Of the 23 factors, 20 have relative scores within ±0.20 of fair value.

Tweet of the Day

Original Post