With the rapid rise of the AI dividend, the South Korean stock market is beginning to face "side effects".

A miracle driven by artificial intelligence is tearing South Korea apart, splitting the country into two completely opposite paths. One path is soaring towards the clouds - with executive bonuses exceeding $800,000 and chip exports breaking historical records; while the other is slowly plummeting - with real household consumption shrinking for the first time in five years, and non-IT industries struggling to survive in structural weakness. Goldman Sachs predicts that the Bank of Korea will be forced to raise interest rates twice this year, and the Bank of Korea itself has also changed its tune, opening the door to "tightening." At the same time, led by chip stocks, the Kospi index rose 5.1% on Monday, reaching an intraday record high of 7,876.60 points, expanding its year-to-date gain to about 86%, solidifying its unmatched status as the world's best-performing stock market. As shown in the graph, the Kospi index has risen by over 80% this year - significantly outperforming the Philadelphia Semiconductor Index, known as the "global semiconductor stock benchmark." Note: Index performance is standardized based on January 2, 2026. K-shaped Differentiation: A Panorama of Dual-Speed Economy In the first quarter of 2026, South Korea's real GDP grew by 1.7% quarter-on-quarter, not only completely shaking off the -0.2% negative growth in the fourth quarter of last year, but also achieving the highest growth rate in five and a half years since the third quarter of 2020, nearly double the Bank of Korea's February forecast of 0.9%. However, when this growth rate is broken down, its structure is extremely uneven - according to a report by the Bank of Korea, if we exclude the IT manufacturing industry with semiconductors as its core, the economic growth rate will directly decrease by about 0.4 percentage points. This is an accurate portrayal of the "K-shaped differentiation." Bank of Korea Governor Lee Chang-yong stated at a press conference after the rate meeting in February that the three factors driving the current economy's differentiation are: the growth structure dominated by the IT industry, rapidly rising asset prices, and the AI technology leap far exceeding expectations. Citigroup economists' latest forecasts indicate that driven by the global AI capital expenditure cycle, South Korea's chip exports are expected to increase by as much as 56% for the whole of 2026, a significant acceleration from 23% in 2025, and may directly raise the annual GDP growth rate by 1.3 percentage points. A prospect report released by the Korea Export-Import Bank on May 3 also noted that exports in the second quarter are expected to increase by 30% year-on-year, reaching around $230 billion, but the "decoupling phenomenon between export items is intensifying" - with semiconductor prices on the rise, while non-IT products such as petrochemicals continue to slow down. This dual-speed structure is forcing the central bank to make difficult decisions. Since May 2025, the Bank of Korea has frozen the benchmark interest rate at 2.50% for six consecutive times. However, this balance is facing continued pressure from both ends. Causes: Windfall profits in the chip industry and "sky-high bonuses" During the first quarter earnings season, South Korean semiconductor giants such as SK Hynix and Samsung Electronics reported historically high performance. SK Hynix recorded first-quarter revenue of 52.58 trillion Korean won, a year-on-year increase of 198%, operating profit reached 37.61 trillion won, a surge of 405% year-on-year, and the operating profit margin soared to 72%, surpassing that of Nvidia during the same period. While DRAM shipments remained stable quarter-on-quarter, average selling prices surged by 60%; NAND shipments even decreased by 10% quarter-on-quarter, but average selling prices spiked by 70% - the market trend of "stable quantity, rising prices" indicates that the memory chip market has shifted from a buyer's market to a seller's market. A more profound structural change lies in the distribution mechanism. In September 2025, SK Hynix reached a milestone labor agreement with its labor union: cancelling the previous limit of profit sharing not exceeding 1000% of basic wages, and instead incorporating 10% of annual operating profits directly into an employee bonus pool, shared by all employees, and signing a decade-long commitment to this system. The result is that by 2025, the average bonus received by employees was about 1.5 times their annual salary. Market institutions have made forward-looking calculations based on this. Analysts' forecasts show that SK Hynix's full-year operating profit for 2026 is expected to be around 207.4 trillion won, reaching 272.4 trillion won in 2027; while Macquarie Group is more optimistic, predicting a profit of 4.47 trillion won next year. Based on the company's approximately 35,000 employees, this means that the average bonus per employee in 2026 will be between 40,000 and 54,000 US dollars. If Macquarie's forecast is realized, the average bonus per employee in 2027 will approach 878,000 US dollars. KB Securities of South Korea has provided a more specific estimate: around 717 million Korean won per person in 2026 (about 3.35 million RMB), and about 1.023 billion Korean won per person in 2027 (about 4.78 million RMB). What do these numbers imply? Even with the most conservative estimates, the bonus amounts exceed the average annual income of nearly 30 million workers in South Korea by 20 times. In the South Korean workplace, a trendy phrase is gaining popularity - "SK Medical Dentistry," taking the first syllables of SK Hynix, medical school, dental school, and Korean medical school, symbolizing the growing status of semiconductor engineers surpassing traditional elite professions. However, on the flip side, a helpless message from a Hyundai Motor employee expresses concerns about the significant disparity in bonuses, making it difficult to talk about fairness in a competitive labor market. Another veterinarian laments that after years of training and heavy debts, their income is only a fraction of the bonus received by chip workers. According to data from the South Korean Statistics Office, actual household consumption expenditure in 2025 decreased by 0.4% year-on-year, marking the first annual decline since the impact of the epidemic. More alarmingly, amidst the semiconductor boom and strong stock market, income distribution indicators have significantly worsened - in the fourth quarter of 2025, disposable income for the bottom 20% of households increased by only 2.4%, while the top 20% increased by 5%. During the same period, the surplus in consumption for bottom-income households (disposable income minus consumption expenditure) decreased by 403,000 Korean won from the previous year, while for top-income households, it expanded by 4.25 million Korean won. The trend of income polarization is becoming more entrenched. The latest data shows that in 2024, the highest 20% of household incomes in South Korea were 5.78 times higher than the lowest 20% of households, an increase from the previous year; meanwhile, the relative poverty rate has risen to 15.3%. Nikko Securities economist Jeong-Woo Park points out a deeper structural contradiction: the semiconductor industry is heavily reliant on imported equipment and is capital-intensive rather than labor-intensive, meaning that the "chip boom has quite limited spillover effects on the broader labor market and domestic investment." He adds that while returns can be more widely distributed through financial channels such as stock ownership and shareholder returns, this transmission mechanism is far from universal income growth. Path to rate hikes: From "standstill" to "July likely to be a major event" In this context, Goldman Sachs has determined that South Korea's K-shaped economy needs rate hikes, with the core logic summarized as "internationally-driven rate hikes" - the drain effect of chip exports creating huge trade surpluses and currency appreciation pressure, while inflation on the other end provides supplementary confirmation. Meanwhile, market expectations of the Bank of Korea's policy stance have fundamentally reversed over the past three months. Entering May, calls for rate hikes have surged. On May 4, Bank of Korea Senior Deputy Governor Yoo Sang-dae clearly stated during the Asian Development Bank Annual Meeting in Uzbekistan: "It may be time to stop lowering interest rates and consider shifting towards raising rates." He noted that while the Middle East conflict has increased economic uncertainties, domestic price increases have exceeded previous expectations, and the semiconductor cycle is significantly stronger than market estimates. Yoo Sang-dae further stated that at the rate decision meeting on May 28, there is a "possibility" of signaling rate hikes sometime this year or thereafter. South Korea's CPI in April rose to 2.6% year-on-year, significantly higher than March's 2.2%, marking the largest annual increase since July 2024; oil product prices surged by 21.9% year-on-year, hitting a new high since the Russia-Ukraine war. Core inflation remained steady at 2.2%. More importantly, the self-fulfilling expectation channel is opening up - one-year inflation expectations in April have risen to 2.9%, up 0.2 percentage points from March, just one step away from the 3% warning threshold. In April, the year-on-year increase in the living price index reached 2.9%, indicating that the most frequently perceived price increases by residents have exceeded the overall CPI. For every one-point increase in perceived inflation, inflation expectations rise by 0.66 percentage points - exactly the "expectation spiral" path that the Bank of Korea is most wary of. The latest market pricing on May 11 has further pre-positioned this expectation. According to the FRA interest rate prediction model by Korea's Yonhap Infomax, the implied interbank lending rate as of August 8 has risen to 2.834%, implying about 1.5 rate hikes from the current benchmark rate of 2.50%. The market interprets this as a high probability that the Bank of Korea will start raising rates in July. A bond manager at an asset management company said, "Price data for May is expected to rise further, and the pressure on the central bank is like a 'fire under the eyebrows.' Unless there is a major unexpected event, a rate hike in July is highly likely." Goldman Sachs' latest report on May 11 further clarified the rate hike timeline: raising rates by 25 basis points each in the third and fourth quarters. The team led by Goldman economist Andrew Tilton wrote in the report: "Tech exports are expected to double this year, accounting for nearly 30% of GDP. At the same time, due to regional supply surpluses and energy shocks, non-tech exports will remain weak." The report makes a clear qualitative statement: "The K-shaped cycle indicates that targeted, cautious fiscal policy should be adopted. With the sharp growth in AI-driven exports, the Korean won should appreciate." In addition to high inflation, another reality is that senior officials at the Bank of Korea have reached a consensus that the Korean won is undervalued. Bank member Shin Sung-hwan simultaneously stated that he "agrees with the view that the Korean won is undervalued." This essentially serves as a policy signal - the central bank believes that the current exchange rate level has deviated from fundamentals, and interest rates are the most direct tool to correct undervaluation. Maintaining a low interest differential would keep pressure on the Korean won, while initiating rate hikes could recalibrate the exchange rate. Under these constraints, rate hikes have shifted from being an option to being a direction. Bank of Korea Governor Lee Chang-yong has explicitly stated, "Interest rates are not the appropriate tool to address the K-shaped recovery issue. This problem should be dealt with through fiscal policy and other institutional reforms." This implies that monetary policy has been relieved of the mission to "correct the imbalance of the K-shaped recovery," and should focus on its core mandate - stability in inflation and exchange rates. The primary purpose of rate hikes is to defend the Korean won exchange rate and contain inflation, which is crucial for macroeconomic stability. Economists at ING Group offer a typical summary logic: if GDP growth far exceeds potential levels and inflation expectations continue to rise, the Bank of Korea will focus on its inflation target and enter a rate hike path in the second half of 2026. Long-term perspective: Hedging narratives of Asia's "super cycle" However, if the timeline is extended, another narrative seems to be trying to provide a converging force for this imbalance. The Morgan Stanley Asia team recently released a series of research reports indicating that Asia is entering a new round of industrial "super cycle," with the core DRIVE shifting from traditional real estate and inventory replenishment towards AI infrastructure, energy security, and defense spending as three structural main themes. The bank expects that Asia's fixed asset investment will increase from around $11 trillion in 2025 to $16 trillion by 2030, with a nominal annual compound growth rate of about 7% from 2026 to 2030, significantly higher than recent trends. Capital expenditures by major chip companies are expected to increase from around $105 billion in 2025 to about $250 billion per year by 2028. This perspective is important because it forms a subtle interplay with Goldman Sachs' "K-shaped" narrative. Even though in the short term, the imbalance in the South Korean economy is worrisome, economists at Morgan Stanley believe that the scope of this capital expenditure frenzy will gradually expand over time, spreading through job creation and wage growth to boost broader consumption more robustly, forming a relatively benign self-reinforcing loop. Goldman Sachs economists also predict that the surge in tech exports will propel South Korea's current account surplus to exceed 10% of GDP in 2026, setting a historical record; and the annual GDP growth rate will rebound from 1% in 2025 to 2.5%. However, this in itself is a warning: the expansion's structure is already clear - the upper track of the K-shaped will continue to steeply rise, while the repair of the lower track still requires the central bank's restraint, precise fiscal policy, and a real determination for institutional reform.