Bank of Korea warns AI chip leverage threatens markets

The Bank of Korea has warned that concentrated and leveraged trades linked to Samsung Electronics and SK Hynix could increase financial-market volatility if demand for artificial intelligence chips weakens.

Bank of Korea’s September monetary policy report, published on Sept. 10, examined the country’s semiconductor-led expansion alongside rising asset prices, household borrowing and changing conditions in overseas financial markets.

Bank of Korea connects AI chip trades to market risk

Samsung Electronics and SK Hynix now account for nearly half of the Kospi’s market capitalization, according to the central bank’s analysis reported by the Wall Street Journal. Their earnings and share prices have become closely tied to global spending on AI infrastructure.

The concentration gives both companies an unusually large influence over South Korea’s benchmark index. Price moves in the two chipmakers can affect index funds, derivatives, retirement portfolios and structured products linked to the Kospi.

Overseas leverage has created another channel. The value of Hong Kong-listed leveraged exchange-traded products tied to Samsung and SK Hynix increased more than twentyfold during the first half of 2026, the Wall Street Journal reported.

Such products use derivatives to multiply the daily return of an underlying stock. A two-times long fund seeks twice the daily gain, while an inverse product can rise when the referenced share falls.

Daily rebalancing can require fund operators to buy into rising markets and sell during declines. The Bank of Korea warned that rapid adjustments by large products could reinforce price movements and transmit volatility between overseas trading venues and Seoul.

Several products reportedly used leverage of up to four times while opening and closing positions connected with global memory-chip companies. The central bank did not identify an immediate failure or announce enforcement action against a particular fund.

South Korean authorities have already responded to volatility linked to single-stock products. The government announced proposed restrictions in July that could cap an individual’s allocation to leveraged single-stock ETFs at 20% of investment assets.

The planned rules followed sharp changes in domestic technology stocks and forced adjustments by leveraged funds. Authorities have not said the restrictions will remove all market risks tied to overseas products.

Semiconductor dependence extends beyond the Kospi

South Korea’s semiconductor industry supplies high-bandwidth memory and advanced dynamic random-access memory used in AI accelerators. Samsung, SK Hynix and U.S.-based Micron are the main large-scale suppliers of advanced memory products.

Nvidia, AMD and major cloud operators rely on such components for AI servers. Demand from Microsoft, Alphabet, Amazon, Meta and Oracle has supported Korean chip exports, factory investment and corporate earnings.

During some months in 2026, semiconductors represented more than 40% of South Korea’s merchandise exports, according to reports citing customs and central-bank data. The exact share changes with chip prices, shipment volumes and demand for other Korean exports.

SK Hynix has benefited from high-bandwidth memory demand, while Samsung has expanded production and sought approval for newer AI memory products. Company forecasts remain exposed to customer orders, production yields and changes in memory prices.

Samsung and SK Hynix have announced shareholder-return plans totaling more than 130 trillion won, or approximately $97 billion, for 2026. Reuters reported that the plans are supported by cash generated during the AI-related memory boom.

Investor reaction to the payouts was restrained because some shareholders continued to seek governance changes and share repurchases. Analysts cited by Reuters described the earnings gains as dependent on a cyclical industry.

The companies rejected a separate proposal from Korea Electric Power Corp. seeking 25 trillion won, or close to $18.7 billion, in advance payments for electricity infrastructure serving planned chip manufacturing clusters, Reuters reported.

A document submitted to a South Korean lawmaker showed that KEPCO had proposed using the money to secure power capacity for future semiconductor facilities. The two chipmakers did not accept the requested financing structure.

GDP figures require a real-versus-nominal distinction

The 21.9% figure cited in some reports concerns nominal economic measurements and should not be presented as South Korea’s inflation-adjusted growth rate. Real GDP, which adjusts for price changes, grew far more slowly.

South Korea’s real GDP expanded 0.6% from the previous quarter during the second quarter of 2026. Nominal GDP rose 26.4% from one year earlier as higher semiconductor export prices improved the country’s terms of trade.

The GDP deflator, which measures price changes across domestically produced goods and services, increased 21.9%. Improved export prices can lift nominal output and national income without indicating a comparable rise in the volume of goods and services produced.

During the first quarter, real GDP grew around 3.6% year over year, according to ING research. The quarter-on-quarter increase reached 1.7%, supported by exports, investment and domestic spending.

The Bank of Korea raised its full-year real GDP growth forecast from 2% to 2.6%. The central bank attributed much of the revision to semiconductor exports connected with global AI investment.

Consequently, forecasts of 3.3% to 3.5% growth cited in the supplied report are not the Bank of Korea’s current official full-year projection. The September monetary policy report says economic growth is “expected to remain robust,” but the figure published by the central bank is 2.6%.

The bank raised its inflation forecast from 2.2% to 2.7%. Core inflation, which removes some volatile components, is forecast at 2.4%.

After consecutive increases, South Korea’s policy rate stands at 3%. The central bank lifted it from 2.5% across its July and August meetings as inflation and financial-stability concerns intensified.

A reversal in AI spending could reach other markets

The Bank of Korea examined how a reduction in global AI spending could affect semiconductor orders, Korean exports and domestic asset prices. It did not predict a specific date for a downturn.

Some central-bank analysis suggested global AI investment growth could reach its fastest pace before the end of 2026. A later slowdown remains a scenario, not a confirmed spending plan from technology companies.

Vendor financing forms part of the bank’s concern. Under such arrangements, hardware suppliers or related finance companies help customers purchase chips and computing equipment, which can support sales while increasing credit exposure.

The bank compared certain financing patterns with practices seen during the dot-com period. Special-purpose vehicles used for data center projects can place debt outside the main operating company’s directly reported borrowings, depending on the legal and accounting structure.

Its report did not claim every AI financing arrangement is unsafe. The warning focused on leverage, market concentration and the possibility that lower expected returns could cause lenders and investors to reduce exposure at the same time.

China presents a separate source of competition. Domestic manufacturers are investing in memory chips and chipmaking equipment, though production capacity and technical performance vary between companies.

A faster Chinese advance could pressure Korean chip prices or market share, according to analysts. No verified evidence shows that China has already displaced Samsung or SK Hynix in large-scale advanced HBM supply.

Crypto.news previously reported that concerns over AI spending and Chinese chipmaking progress triggered a sharp Kospi selloff in July. SK Hynix fell as much as 14%, while Samsung dropped as much as 13.4% during that session.

Crypto-linked derivatives create another connection. Lighter introduced on-chain perpetual contracts tied to Samsung, SK Hynix and other Korean assets with leverage reaching 10 times, according to its February announcement.

Such contracts do not represent ownership of the underlying Korean shares. Their prices reference the assets while traders post collateral and settle gains or losses through the platform.

The Bank of Korea will review further rate increases

The central bank said it will determine the timing and pace of further increases after examining inflation, economic activity and financial-stability conditions. Its next scheduled monetary policy decision is due Oct. 22.

A board member said on Sept. 10 that policymakers must assess the effects of the two previous increases before deciding how quickly to tighten again, Reuters reported.

Housing prices and household borrowing remain part of that review. The September report said home-price increases in the Seoul metropolitan area and household loan growth were accelerating.

Exchange-rate conditions provide another input because changes in U.S. interest rates can affect the won, imported inflation and foreign investment flows. The Bank of Korea said future decisions would remain dependent on incoming economic and market data.

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