South Korea Overtakes India as Sixth-Largest Equity Market Amid AI Investment Surge

A strong rally in AI-driven technology stocks has pushed South Korea ahead of India in global market rankings, reflecting shifting investor focus toward semiconductor and artificial intelligence sectors.

South Korea Climbs to Sixth Spot Globally as AI Boom Reshapes Equity Markets

Korea Surpasses India in Global Market Capitalisation Rankings

South Korea has moved ahead of India to become the world’s sixth-largest equity market by market capitalisation, according to a recent report by Jefferies. This development highlights a shift in global investment patterns, driven largely by the rapid expansion of artificial intelligence (AI) and semiconductor industries.

Korea’s stock market capitalisation has reached approximately $4.92 trillion, slightly surpassing India’s $4.82 trillion. The gap with Taiwan, currently holding the fifth position with a market value of $5.26 trillion, has also narrowed significantly.

The surge in Korea’s market value has been fuelled by strong investor demand for AI-linked technology companies, particularly semiconductor manufacturers that are central to the global AI ecosystem.

AI Emerges as the Dominant Investment Theme

The Jefferies report, titled The Battle for Capital and Fast Tracking, emphasizes that artificial intelligence continues to be the most influential trend shaping global financial markets. Investors are increasingly allocating funds to companies involved in AI development, chip manufacturing, and related technologies.

South Korea’s leading technology firms have benefited immensely from this trend, as global demand for advanced semiconductors continues to rise. These chips are critical for powering AI applications, data centres, and next-generation computing systems.

However, the report also cautions that while AI presents significant growth opportunities, it may be creating pockets of overvaluation in certain segments of the market.

Mega AI IPOs in the US Could Shift Global Capital Flows

Another major factor influencing global markets is the anticipated wave of large-scale initial public offerings (IPOs) in the United States. Companies such as SpaceX, OpenAI, and Anthropic are expected to launch blockbuster IPOs that could attract substantial investor interest.

Among these, SpaceX is projected to raise around $75 billion at a valuation close to $1.77 trillion. Such massive listings have the potential to draw significant liquidity from global markets, including emerging economies.

Jefferies notes that recent changes in US index inclusion rules could allow these newly listed companies to be added to major indices more quickly. This would compel passive investment funds to purchase their shares, further boosting demand and potentially diverting capital from other markets.

Risk of Liquidity Drain from Existing Stocks

The report warns that the influx of mega IPOs could “absorb liquidity” from existing equities, particularly those in the AI and technology sectors that have already experienced strong inflows.

As investors reallocate funds to participate in high-profile IPOs, there is a risk that valuations of currently listed companies may face pressure. This could lead to increased volatility in global equity markets, especially in regions heavily reliant on foreign capital.

Signs of Speculative Activity in Asian Markets

Jefferies also highlights growing signs of speculative behaviour in Asian technology markets. In South Korea, margin debt has surged by approximately 140% since early 2025, indicating increased leverage among investors.

Additionally, there has been a sharp rise in investments in leveraged exchange-traded funds (ETFs) linked to semiconductor companies such as SK Hynix and Samsung Electronics.

One leveraged ETF focused on SK Hynix, listed in Hong Kong, has accumulated assets exceeding $10 billion, making it the largest single-stock leveraged ETF globally. This trend reflects heightened investor enthusiasm but also raises concerns about potential market overheating.

China Accelerates Semiconductor Ambitions

The report also draws attention to China’s growing presence in the semiconductor industry. Companies such as Yangtze Memory Technologies (YMTC) and ChangXin Memory Technologies (CXMT) are preparing for IPOs aimed at raising capital to expand their production capacities.

These developments are part of China’s broader strategy to reduce dependence on foreign technology and establish itself as a global leader in chip manufacturing. Increased competition from Chinese firms could reshape the global semiconductor landscape in the coming years.

Supporting this trend, China’s integrated circuit exports nearly doubled year-on-year in April, underscoring the rapid growth of its semiconductor sector.

Geopolitical Risks Remain a Key Concern

Despite the strong focus on AI, Jefferies cautions investors against overlooking geopolitical risks. Ongoing tensions involving Iran and the continuing conflict between Russia and Ukraine pose significant challenges to global economic stability.

These geopolitical developments have the potential to disrupt energy supplies, increase commodity prices, and contribute to inflationary pressures. Such risks could impact investor sentiment and market performance.

Energy Sector as a Strategic Hedge

In light of these uncertainties, Jefferies recommends maintaining exposure to the energy sector as a hedge against geopolitical disruptions. Energy markets are highly sensitive to global conflicts, and any escalation could lead to sharp price movements.

By investing in energy assets, investors can potentially offset risks associated with volatility in other sectors, particularly technology.

Changing Dynamics in Global Capital Allocation

The report concludes that the global investment landscape is entering a new phase characterized by intense competition for capital. Factors such as mega IPOs, technological advancements, geopolitical tensions, and shifting market leadership are reshaping how investors allocate funds.

South Korea’s rise in market rankings is a clear example of how quickly capital flows can shift in response to emerging trends. For India, this development underscores the importance of strengthening its own technology and innovation ecosystem to remain competitive.

Conclusion: A New Era of Market Competition

The overtaking of India by South Korea as the sixth-largest equity market reflects broader changes in the global financial system. The dominance of AI as an investment theme, combined with evolving geopolitical and economic dynamics, is redefining market leadership.

As investors navigate this complex environment, balancing growth opportunities with risk management will be crucial. The coming years are likely to see continued shifts in global capital flows, driven by innovation, policy changes, and geopolitical developments.