Bank of Korea: Semiconductor boom to last, stock market unlikely to see sustained decline

South Korea's central bank anticipates a prolonged period of expansion for the semiconductor industry, largely fueled by the burgeoning field of artificial intelligence.

The Bank of Korea (BOK) stated that the semiconductor market will likely continue its growth trajectory for a considerable time. This expansion is attributed to increasing AI applications, such as embodied AI, and the subsequent investments in related infrastructure. The bank's analysis, drawing from major forecasting institutions, suggests the global semiconductor market will remain favorable at least through next year.

Factors contributing to this optimistic outlook include rising computational demands from AI proliferation, significant investments by major tech companies vying for market leadership, and supply constraints due to the intricate nature of semiconductor manufacturing. However, the BOK also identified potential downside risks. These include financial market volatility stemming from concerns over AI profitability, a possible reduction in physical investments by big tech firms, and energy supply bottlenecks.

Furthermore, the BOK pointed out that the benefits of the semiconductor boom might not spread evenly across the economy, potentially leading to a slower diffusion of growth to other sectors and segments of society. The bank also reiterated its stance on the necessity of raising interest rates, citing rising inflation, improving economic growth, and financial stability concerns. The BOK indicated that the timing of future rate hikes would depend on monitoring inflation pressures, economic recovery trends, and financial stability conditions.