The old formula — rising interest rates bring falling share prices — may no longer apply. As AI has moved beyond market hype to generate real capital expenditure and corporate earnings, analysts say investors should resist the urge to flee equities. With AI data center investment spreading from semiconductors into power, nuclear energy, defense, shipbuilding and robotics, the advice is clear: it is too early to leave the market ahead of an AI cycle slowdown not expected until after 2031.
Yom Seung-hwan, a director at LS Securities, made the case at Herald Money Festa 2026, held Saturday at Dongdaemun Design Plaza Art Hall 1 in Jung-gu, Seoul. "The formula that rising rates drag down share prices no longer holds because of AI," he said. "Rate hikes are a headwind for stocks, but we have entered an age of investment." With US interest rates hovering around 5.2 percent and NASDAQ still hitting record highs, Yom argued that investors should focus less on rates themselves and more on whether economic growth and corporate earnings can outpace the burden of higher borrowing costs.
"Looking at the supply contracts and capital expenditure commitments actually under way, it is too early to worry about a peak in the AI investment cycle," he said. "Japan is investing around 3,300 trillion won across 17 major manufacturing sectors, and South Korea has three mega-projects with combined investment of 1,450 trillion won in progress."
Yom's top investment pick was, by far, semiconductors. As AI data center spending grows, demand for HBM and SSD memory chips rises, feeding directly into earnings at Samsung Electronics and SK hynix. With AI investment next year forecast to reach $1.32 trillion — around 1,600 trillion won — Yom said the continued expansion of AI spending would underpin semiconductor earnings. "The peak of AI spending is projected for 2031," he said. "There is no need to start worrying now about something that belongs in 2028 or 2029. AI investment still has a long way to go."
Yom argued that if the AI investment boom translates into real earnings growth, the rerating of South Korean equities could spread beyond semiconductors to power, defense, shipbuilding and robotics. Pointing to the Kospi's price-to-earnings ratio of around 5.45 times — well below its 30-year average of 9.8 times — he said, "In terms of earnings alone, the Korean stock market is still extremely cheap. Ultimately, share prices follow corporate earnings."
The power infrastructure sector was highlighted as a new beneficiary of AI spending. As AI data centers multiply and electricity demand surges, Yom said solar power and energy storage systems could serve as a short-term fix to bridge supply gaps faster than nuclear plants, which take a decade to build. He recommended watching Korean nuclear manufacturers for their role in the US nuclear expansion drive, and solar and ESS players for near-term power demand.
"The United States urgently needs more electricity because of AI data centers," Yom said. "South Korea has nuclear manufacturing capabilities and overseas construction experience, which positions it to seize opportunities in that market." He added that solar and ESS can "supply power faster than nuclear plants."
Shipbuilding was also presented as a sector newly linked to AI demand. Data centers require growing supplies of engines for power generation, and Yom noted that data centers could eventually expand beyond land to ships or even space. "Data centers could end up on ships or in space," he said. "A market connecting shipbuilding to AI could open up."
Yom also pointed to physical AI — the extension of AI from software into robotics and factory floors — as an area where South Korean manufacturers hold an edge. Companies such as Hyundai Motor, which possess both manufacturing data and real production processes, are well placed to compete in the physical AI market, he said. Citing Hyundai Motor Group's robotics business, Yom said, "Companies that cannot internalize AI capabilities will struggle to survive. Korean companies that simultaneously hold manufacturing data and physical technology have an opportunity."
Defense was the other sector Yom flagged. With US missile demand rising and South Korea already possessing the production base to fill supply gaps quickly, he said Korean defense firms are positioned to step in where American capacity falls short. "The United States needs to ramp up missile production but that takes time," he said. "South Korea is already producing them and can quickly fill what the US lacks."
kacew@heraldcorp.com
hajun825@heraldcorp.com
