AI boom drives South Korean and Taiwanese stocks, yet volatility spooks investors

AI-driven rally in emerging markets, led by South Korean and Taiwanese chipmakers, has triggered sharp volatility, foreign investor outflows, and concentration risks, testing investor nerve despite long-term optimism. South Korea's KOSPI nearly doubled before losing about 40 percent in six weeks; TSMC fell double digits. Volatility in MSCI's $1.8 trillion emerging-markets index exceeded pandemic levels. Foreign outflows reached $100 billion from South Korea and $44 billion from Taiwan. Nine companies, mostly Taiwanese and South Korean tech firms plus Alibaba and Tencent, now make up over 40 percent of the MSCI index, reducing diversification benefits and tying emerging markets to the global AI cycle.