Navigating the AI boom: South Korea's market surge, profit distribution, and future fund proposals

South Korea's stock market, represented by the KOSPI, has reached unprecedented levels, surpassing previous highs and signaling a new era for the nation's equities. This surge is largely attributed to the ongoing artificial intelligence (AI) boom and a significant structural shift in corporate earnings, especially within the semiconductor industry.

Corporate profits for KOSPI-listed companies have dramatically increased, projected to reach 142 trillion won in 2024 and 189 trillion won in 2025, a substantial leap from the approximately 80 trillion won in 2023. This growth far exceeds the roughly 100 trillion won average seen since 2010, indicating a fundamental change in the market's performance. The demand for high-bandwidth memory (HBM) and the competition among big tech firms to build data centers have directly boosted the profits and operating margins of key South Korean semiconductor companies.

Despite the impressive performance, market analysts are scrutinizing the sustainability of this growth. Potential risks include the possibility of unsold inventory if some big tech companies fail in the AI race, the limitations of internal 'circular trading' where AI startups use investment funds to purchase products from their investors, and the re-emergence of competitors like China's CXMT. Geopolitical uncertainties, including potential supply chain realignments and Middle East tensions, also add to market volatility.

The substantial increase in corporate profits has also sparked discussions about profit distribution. Recent disputes over performance bonuses at Samsung Electronics highlight internal conflicts arising from performance disparities between business units. Experts suggest that profit distribution should follow predictable criteria set by the board and shareholders, considering future investments and capital costs, rather than relying on temporary booms.

Furthermore, the anticipated large 'excess tax revenue' stemming from the strong corporate performance has created inter-ministerial friction regarding its allocation. While some ministries advocate for expanding employment and welfare programs, others prioritize industrial and technological infrastructure support. A proposal for a 'Future Response Fund' has emerged as a potential solution for efficient revenue distribution, aiming to invest in stocks and bonds, and link these investments to youth asset formation and pension reform.