This 'Boring' South Korea ETF Is a Stealth AI Hardware Play
The iShares MSCI South Korea ETF (EWY) has delivered exceptional returns, up 80% year-to-date and 200% over the past year, thanks to its heavy exposure to AI memory chip manufacturers, defying the historical 'Korea discount'.
Key Numbers
This 'Boring' South Korea ETF Is a Stealth AI Hardware Play
According to a report from 24/7 Wall St., the iShares MSCI South Korea ETF (EWY) has posted remarkable gains, rising 80% year-to-date and approximately 200% over the past year. This performance is unusual for a country fund, especially one that has been synonymous with the "Korea discount" for a decade.
Details
The reason behind this surge is the fund's indirect exposure to the AI hardware supply chain. EWY invests heavily in companies like Samsung Electronics and SK Hynix, two of the largest producers of high-bandwidth memory (HBM) chips used in AI accelerators from NVIDIA (NVDA) and others. Growing demand for these chips has boosted Korean stocks, lifting the ETF.
Context
Historically, the Korean stock market suffered from the "Korea discount," where stocks traded at lower valuations due to weak corporate governance and family-owned conglomerates. However, the global AI boom has shifted this dynamic, making South Korea a critical node in the semiconductor supply chain.
What This Means for Investors
For investors, EWY offers a diversified way to gain exposure to the AI hardware theme without concentrating on a single stock. However, risks include concentration in the semiconductor sector and geopolitical tensions involving South Korea.
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