AI boom reshuffles global stock market pecking order as South Korea and Taiwan surge

A global reshuffling in stock-market hierarchy is underway, with synthetic intelligence redrawing the pecking order of fairness markets and propelling Taiwan and South Korea previous a number of long-established Western bourses. 

Taiwan has overtaken Canada to change into the world’s sixth-largest stock market, whereas South Korea has leapfrogged the U.Okay. into eighth place, in keeping with HSBC information monitoring global equity-market capitalization rankings. It is the newest demonstration of how the AI boom is concentrating market energy in economies sitting on the middle of the semiconductor provide chain. 

Taiwan’s stock market was solely the world’s twelfth largest in 2004, price roughly $500 billion. South Korea ranked thirteenth at $400 billion. Right this moment, the 2 markets are valued at $4.7 trillion and $4.4 trillion respectively. The highest 5 are the U.S., China, Japan, Hong Kong and India. 

A reshuffling like this is not unprecedented. China entered the highest tier of global markets within the late 2000s, whereas India surpassed Hong Kong in late 2023 earlier than falling again under it.

That mentioned, the ascent of South Korea and Taiwan is placing.

“What’s uncommon right here is the pace and how slim the drivers are,” mentioned Billy Leung, global funding strategist at Global X ETFs. “High 10 reshuffles occur roughly each cycle, however normally on the again of a home boom, an enormous IPO, or a few years of outperformance.”

The rally has been pushed by a rare focus of capital right into a handful of AI-linked corporations. TSMC alone now accounts for greater than 40% of Taiwan’s market capitalization, whereas Samsung Electronics and SK Hynix collectively make up a report 42.2% of South Korea’s Kospi index. 

“Each indices have successfully change into AI and semiconductor proxies,” mentioned June Chua, head of Asia equities at Manulife Funding Administration. 

Goldman Sachs’ chief regional fairness strategist for Asia-Pacific, Tim Moe, agreed.

“It is the AI {hardware} theme that is clearly what’s propelling issues.” The transition towards agentic AI has triggered “an explosion of so-called token demand,” making a provide scarcity that’s driving extraordinary pricing energy for chipmakers, he mentioned.

That additionally may make the positive aspects extra susceptible to reversal. South Korean equities dropped late final week after international traders dumped roughly $13 billion price of native shares, triggering sharp swings within the benchmark index. This additionally comes as shares of Samsung Electronics, a heavyweight within the Kospi, have whipsawed as traders monitored labor negotiations and potential for a strike.

The AI-fueled rally has additionally include sharp bouts of volatility, exposing traders to sudden swings in a handful of heavyweight shares. MSCI’s global head of index regional analysis options Raman Aylur Subramanian mentioned the AI-driven repricing collided with geopolitical shocks and shifting interest-rate expectations this 12 months, making the primary quarter of 2026 “notably disruptive for global markets and multi-asset portfolios.”

“We’re now reaching ranges the place many Asian portfolios are beginning to face focus threat, that means an excessive amount of publicity to a small variety of shares within the area,” mentioned HSBC’s Asia-Pacific head of fairness technique, Herald van der Linde. “Which will restrict additional upside.”

That focus threat has additionally prompted comparisons with markets such as Saudi Arabia and Denmark, the place benchmark indexes are closely dominated by Aramco and Novo Nordisk respectively. 

Danish shares got here underneath stress as worries grew over slowing demand for weight problems remedies produced by Novo Nordisk, whereas Saudi Arabia’s market, which is basically pushed by Saudi Aramco, weakened alongside falling crude costs. Saudi equities have since recovered a part of these losses as oil costs rebounded.