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South Korea's semiconductor rally, led by Samsung Electronics and SK Hynix, has entered the steepest ascent in market history.

The gains have already eclipsed those seen during the dot-com bubble, yet analysts are maintaining an optimistic outlook, arguing that further upside remains. Rising volatility warrants a closer watch for signs of a bubble bursting, but no such warning signals have appeared yet, they say.

According to a quantitative report by KB Securities, the combined share prices of Samsung Electronics and SK Hynix rose 798% from their 500-day lows as of June 1 — surpassing the 717% gain recorded at the peak of the dot-com bubble in 2000.

A surge of this magnitude would normally raise overheating concerns, but analysts believe the current bull market has yet to reach its peak.

"Bubbles extend the life of market leaders and create the kind of outliers that go down in history," said Kim Min-gyu, a researcher at KB Securities. "With earnings and retail investor demand still strong, there is more room to rise."

Profit growth centered on semiconductors is lifting market forecasts. Hana Securities estimates that Kospi net profit will reach 711 trillion won (approximately $470 billion) this year, expanding to 890 trillion won next year.

The brokerage said that if current earnings projections materialize, the Kospi could climb to the 10,400 level without any separate revaluation of price-to-earnings multiples.

Analysts particularly noted the parallels between the current market environment and the dot-com era of 1999, when an internet investment boom drove U.S. economic growth. Stocks continued to rise even as the Federal Reserve raised its benchmark interest rate.

Hana Securities said that because today's growth is also driven by AI infrastructure investment rather than consumer spending, rate hikes are unlikely to translate directly into falling share prices.

"The reason stocks were able to keep rising after rate hikes in the second half of 1999 was that investment-led economic growth continued," said Lee Jae-man, a researcher at Hana Securities.

Lee also argued that rate hikes themselves are unlikely to materialize easily. "U.S. investment activity is solid, but the labor market remains tight while consumer sentiment and the housing market are contracting," he said. "Realistically, this is not an environment where raising the benchmark interest rate is straightforward."

Still, there are signals to watch. KB Securities identified an economic slowdown, an irreversible rise in interest rates, and funding failures among AI companies as the key precursors to a bubble collapse. None of those warning signs have emerged clearly so far, but volatility could intensify as the bull market moves into its later stages.

Ultimately, market attention is shifting from whether a bubble exists to when it will end. With no signs of an imminent collapse, analysts are leaning toward the view that the semiconductor-led bull market will continue for now.

Given that the dot-com bubble was accompanied by extreme volatility in its later stages, however, analysts say investors need to approach the market with greater caution.


th5@heraldcorp.com