South Korea-Focused KORU ETF Tanks Over 20% — And Retail Investors Are Planning To Buy The Dip

• South Korea’s benchmark index (KOSPI) has dropped about 25% from its 2026 peak hit in June. 
• Samsung and SK Hynix make up about 40% of the KOSPI. 
• Retail traders believe demand for high-bandwidth memory (HBM) remains intact. 

The South Korean equity market has transformed from one of the world's standout performers into a hotbed of volatility, as a dramatic roller-coaster ride for the benchmark KOSPI index highlights growing anxieties over the global artificial intelligence trade and escalating macroeconomic risks.

The KOSPI, which surged earlier this year to hit historic record highs driven by a massive influx of foreign capital, recently tumbled as much as 25% from its June peak, forcing regulators to repeatedly deploy emergency trading curbs to halt panic selling.

The high concentration of Samsung and SK Hynix (SKHYX) in the Kospi, about 40%, high market valuations, and missing the potential of a ‘developed market’ status have triggered the recent rout in the Korean equity space in addition to overall rotation out of chipmakers into more traditional sectors. 

SK Hynix (SKHYV) shares dropped about 8%, the KORU ETF lost nearly 20%, and the memory chip-focused DRAM ETF fell about 10% on Monday as investors remain worried that the memory chip cycle may be approaching a peak. 

"The recent string of sharp declines in semiconductor shares appears to have made investors increasingly sensitive to news or analyst reports that could be interpreted negatively," Han Ji-young, an analyst at Kiwoom Securities, told The Korea Times. "The unprecedented volatility in chip stocks is also fueling investor fatigue and prompting capital to flow out of the sector."

The KOSPI index is on-track to record its fourth consecutive week in the red.  

AI Infrastructure Boom

The first half of 2026 saw South Korea emerge as a primary beneficiary of the global tech boom. Foreign portfolio investors aggressively rotated capital out of other emerging markets to chase the semiconductor supply chain in Seoul. This massive wave of foreign institutional inflows pushed the KOSPI to repeated all-time highs.

The rally was fundamentally powered by explosive demand for high-bandwidth memory (HBM) chips used in artificial intelligence infrastructure, heavily concentrating the market's gains in national tech heavyweights like Samsung Electronics Co. and SK Hynix Inc.

However, that intense concentration rapidly turned into a vulnerability. Analysts noted that Samsung and SK Hynix together accounted for roughly 40% of the KOSPI’s total weight. When global sentiment on tech spending wavered, the index experienced an outsized impact.

The impact wasn’t limited to Korean exchanges but quickly spread to U.S. markets as well, with most semiconductor and hyperscaler stocks seeing intense selling over the past few weeks. For instance, the iShares Semiconductor ETF (SOXX) and the VanEck Semiconductor ETF (SMH) ended the previous week about 4% lower. 

"In the U.S. market as well, the sector that contributes most to index gains is semiconductors," Kim Dae-jun, a senior analyst at Korea Investment & Securities, told Korea JoongAng Daily. "Because Korean companies lead the world in chips, global markets are moving under the Korean market's influence." 

Kospi’s Market Concentration And MSCI Exclusion

Investors are becoming increasingly uncomfortable with the high concentration and influence that Samsung and SK Hynix hold over the Kospi’s movement, at a time when global investors have started questioning whether massive corporate capital expenditure on AI infrastructure will translate into immediate earnings. 

But this is not the first time South Korean equities have noticed a pullback. Earlier in March this year, the index fell by nearly 20%, but analysts at Goldman Sachs believed it was a necessary cooling period rather than a structural collapse. 

Alternatively, during its annual market-classification review, global index provider MSCI chose to retain South Korea in its emerging-market bracket due to persistent accessibility challenges in the nation's onshore foreign-exchange market.

Kospi, which was the world’s best-performing index in 2025, has been lobbying for developed-market status in global market indices such as MSCI. An inclusion would guarantee large inflows of foreign capital into South Korean markets. 

From a valuation standpoint, the Buffett indicator, a ratio of market cap to GDP, for the KOSPI was about 220%, a premium relative to its long-term average of about 70%. However, its valuations are not overly expensive compared to its Taiwanese counterpart, which is almost entirely driven by Taiwan Semiconductor Manufacturing Company (TSMC). 

KORU ETF: Retail View 

Retail sentiment on Stocktwits was ‘extremely bullish’ with ‘extremely high’ message volumes. Retail traders across Stocktwits were showing bullish ‘buy the dip’ signals to increase exposure to Korean markets. 

“You’re gonna kick yourself for not buying down here,” one user wrote.  

Another user highlighted that demand for memory chips still remains quite high. 

KORU ETF has jumped 126% year-to-date and the Roundhill Memory ETF (DRAM) has jumped 110% during the same period. U.S. bases chipmakers Nvidia (NVDA) rose 8%, Broadcom (AVGO) gained 11% and Micron Tech (MU) surged 231% year-to-date.