Memory-chip giants Samsung Electronics and SK Hynix now control 60% of South Korea's Kospi index, up from roughly 40% two years ago. The surge reflects investor enthusiasm for artificial-intelligence driven semiconductor demand, pushing both stocks to record highs and nearly doubling the benchmark's value in 2024.

However, this concentration has triggered extreme volatility that Korean markets rarely experience. Regulators intervened twice last week to halt trading after sharp declines, marking an unusual response to market turbulence. Officials have acknowledged allowing new investment products that amplified swings while feeding investor appetite for chip stocks.

Individual investors are increasingly using borrowed money to purchase these volatile shares, raising concerns about potential margin calls if prices reverse. The heavy weighting also risks driving institutional investors away, which could magnify any downturn. Plans to introduce stock options on large-cap names including SK Hynix have been delayed amid the uncertainty.

The rally has transformed the Kospi into the world's top-performing market this year, but the structural vulnerabilities suggest this success may be unsustainable. Heavy reliance on two companies for market stability creates systemic risks that extend beyond typical sector concentration concerns.