Financial experts are warning investors against committing their entire wealth to stocks as AI-related equities appear overvalued [1].
This shift in sentiment comes as a potential market correction threatens the KOSPI rally, which has been heavily driven by semiconductor companies and AI hype [3]. Because these sectors represent a significant portion of the South Korean market, a downturn could trigger broader economic instability for retail investors.
Professor Seok Byung-hoon of Ewha Womans University's Department of Economics said that concerns regarding AI overheating are spreading even in the U.S. [2]. He said that while massive investments are being poured into AI, there is no guarantee as to when profits will actually materialize [2].
This valuation gap has begun to influence investor behavior on the ground. Anchor Um Ji-min said that foreign investors had previously been selling while individual investors continued to buy [1]. However, she said that individual investors have now shifted toward selling during trading sessions [1].
The volatility is linked to the uncertainty of profit timelines for AI technologies. Analysts said that the current market prices do not accurately reflect the actual earnings of these companies, creating a bubble that may eventually burst [2]. This trend is particularly concerning for the South Korean stock market, where the concentration of semiconductor stocks makes the index highly sensitive to global AI sentiment [3].
As the signal for market overheating intensifies, the transition of retail investors from buyers to sellers suggests a growing lack of confidence in the sustainability of current price levels [1].
“AI stocks are likely over-valued relative to the massive capital being poured in.”
The transition of retail investors from 'buying the dip' to active selling indicates a psychological shift in the market. If the AI sector fails to deliver tangible profits to justify its valuation, the resulting correction could disproportionately impact the KOSPI due to its heavy reliance on semiconductor exports and tech-heavy indices.
