If the AI theme has continued to dominate price action in world stock markets, the American economy’s dependence on AI capex has been reconfirmed with the second quarter GDP data.
US real AI-related capex, measured as nonresidential private fixed investment in information processing equipment, software and data center construction, contributed 1.01ppts or 48% to US real GDP growth of 2.1% YoY in 2Q26.
AI-related capex rose by an annualised 10% QoQ in 2Q26 and was up 16% YoY, while non-AI capex rose by an annualised 7.2% QoQ in 2Q26 but was down 0.8% YoY.
It is also worth highlighting the starkly divergent growth between US imports of AI-related goods and non-AI goods.
Thus, US imports of AI-related goods, defined as computers and peripherals, semiconductors and telecom equipment, soared by 73% YoY in 1H26, while non-AI goods imports declined by 13% YoY.
The Korean Economy is Basically an AI Proxy
Interestingly, this dependence on AI capex is even greater in the case of the Korean economy.
In aggregate, manufacturing of computers, electronics and optical products contributed 1.2 percentage points or 67% to the real GDP growth of 1.8% QoQ in 1Q26.
Exact details for 2Q26 are not yet available.
The advance estimates by the Bank of Korea show that real GDP rose by 0.6% QoQ in 2Q26, with real exports rising by 1.4% QoQ driven by the exports of semiconductors and machinery and equipment.
Manufacturing sector GDP expanded by 1.2% QoQ in 2Q26, centered on increases in computer, electronic & optical products and in machinery & equipment.
Still, real private consumption remained weak, rising by only 0.4% QoQ in 2Q26.
The other interesting point is that the latest Korean trade data shows the largest growth gap between exports and imports of goods since 1998, with exports rising by 62.2% YoY in US dollar terms in the three months to July or 36.5 percentage points higher than import growth of 25.7% YoY.
On this point, exports of semiconductors surged by 181% YoY to US$123.4bn in the three months to July, accounting for a record 42.8% of total exports.
Analyzing AI’s Impact on South Korea
Meanwhile in terms of growing geopolitical sensitivities, America and China remain Korea’s two largest export markets, though of late America has been playing catch up with China.
Korean exports to China rose by 89.8% YoY to US$60.6bn in the three months to July, while exports to the US increased by 69.3% YoY to US$53.5bn over the same period.
Exports to the US accounted for 17.7% of Korea’s annualised exports in the 12 months to July, up from 11.6% in the 12 months to September 2018, while China’s share of annualized Korean exports has declined from 27.3% to 19.9% over the same period.
In this respect, Korea under its left-wing President Lee Jae-myung will probably want to steer a more middle ground than his overtly pro-US predecessor.
If exports are booming driven by the AI-triggered demand for chips, the relatively weak import data reflects the continuing reality of a relatively depressed domestic economy.
The booming semiconductor industry is capital intensive, not labour intensive, while Korean manufacturers have been moving more production to America in recent years to take advantage of incentives first implemented under the Biden administration’s Inflation Reduction Act in 2022.
Corporate Korea has announced planned investments in America totaling an estimated US$228bn since late 2021.
While official FDI data shows that Korea’s outward FDI to the US has totaled US$135.1bn in the past five years, up from US$71.2bn in the previous five years.
Outward FDI to the US rose by 107.6% YoY to US$10.15bn in 1Q26.
As a result, there remains a continuing lack of any evidence of a domestic capex cycle in contrast to Taiwan’s experience in recent years where there was significant reshoring.
Korea’s annualised gross fixed capital formation as a percentage of nominal GDP has declined from 32.2% in 2Q23 to 27.5% in 1Q26, the lowest level since 2Q77.
By contrast, Taiwan’s annualised gross fixed capital formation as a percentage of nominal GDP has risen from 21.2% in 2Q18 to a peak of 28.4% in 1Q23 and was 25.2% in 2Q26.
The result has been political pressure on the two big memory companies to announce increases in production capacity in Korea.
The Korean government said in late June that Samsung and Hynix plan to each build two new massive chip fabrication sites in South Korea’s southwest region valued at a combined W800tn (US$518bn).
AI Profits are Straining Korea’s Social Fabric
Meanwhile in a country famed for its obsession with wealth inequality, as reflected in the 2020 Oscar winning movie Parasite, there has been a lot of noise generated this year by reports that Hynix’s 35,000 employees would receive annual performance-related bonuses totaling W25tn (US$18bn) or 10% of Hynix’s forecast operating profits this year, equivalent to US$470,000 (W700m) per employee (see Korea Herald article: “SK Hynix workers got hefty bonuses. Now Samsung, Hyundai workers demand their share”, 20 April 2026).
Hynix stated last year that it would pay out 10% of its OP to its workers.
This news prompted the labour union for Samsung Electronics’ 90,000 employees to threaten an 18-day general strike in May over disputes regarding bonus payments.
The union also called for 15% of the company’s operating profits to be set aside for bonuses with the cap on performance bonuses abolished.
At the moment, performance-related pay is capped at 50% of an employee’s annual salary.
This pressure came after Hynix agreed last September to remove the performance pay cap and agreed to pay 10% of operating profit in bonus, resulting in the bonuses which have been making headlines.
Still, the planned strike was put on hold in late May after union workers approved a deal featuring a 6.2% wage increase and a special performance bonus system.
Under the deal, all chip workers at Samsung will receive 50% of their annual salary as a regular bonus in cash, while Samsung will also set aside 10.5% of its semiconductor division’s operating profits for special bonuses which will take the form of stock.
If such payouts provide a challenge for Korea’s social fabric, the left-wing Minjoo Government is playing its traditional redistributional role of seeking to suppress speculation in high-end residential property.
There have been , for example, policies announced to crack down on multiple ownership of properties.
Properties in designated speculative zones owned by multi-home owners face capital gains tax rates up to 75%, or 82.5% including local taxes, starting 9 May.
President Lee has also banned government officials with multiple homes from participating in real estate policymaking.
Meanwhile, the average salary at both Samsung and Hynix is already double the average of other large enterprises.
If this poses a near-term challenge for the Minjoo Government, at the end of the day it is a problem of success.
Recent Presidential Approval Ratings Look like DRAM Stock Charts
Meanwhile President Lee Jae-myung remains, ironically for a left-wing politician, the champion of asset price inflation.
His Kospi 5,000 target set in his successful 2025 presidential campaign has long since been breached with the explosion in DRAM stocks, with the Kospi hitting a peak this year in mid-June of 9,386 though it has since corrected to 5,263 in late July and is now 6,697.
Samsung and Hynix are down 61% and 50% from their recent peak in June to their recent low in late July/early August.
Meanwhile, stock market margin lending has surged by 105% from W15.8tn at the end of 2024 to W32.4tn last Friday though down from a peak of W38.6tn in late June.
Still, the real unwind has been in Korea’s leveraged ETFs which saw huge inflows and then collapsed.
Korea’s leveraged equity ETFs’ assets under management rose from US$8.3bn at the end of 2025 to a peak of US$50.4bn in late June but have since declined by US$26.5bn to US$23.9bn.
Finally, if Lee is associated with the 5,000 Kospi target his popularity also peaked with the stock market judging by recent polling data.
Lee’s approval rating was 45% in the week ended 20 August, based on the latest weekly poll from Gallup Korea, down from a peak of 67% in April.
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