A new economic order is setting up in Asia, thanks to AI boom. For the first time ever, two South Korean companies beat two biggest Chinese companies in market value. According to a report in Bloomberg, South Korea’s two most valuable companies are poised to eclipse a duo of Chinese internet giants by market cap for the first time. The combined valuation of Samsung Electronics and SK Hynix reached $1.11 trillion during Tuesday trading, narrowly surpassing the combined tally for Alibaba Group Holding and Tencent Holdings — the two biggest Chinese tech firms listed in Hong Kong. The rise marks how an evolving global artificial intelligence boom has reshaped the sector’s investment dynamics in Asia. What makes this important is that Alibaba and Tencent have long been considered as the symbols of Asia’s tech ascent — given their focus on e-commerce and nascent involvement in AI.Shares of Samsung Electronics have rallied 34% so far this year, while SK Hynix has surged about 37%. In comparison, Alibaba has risen roughly 14% in Hong Kong, while Tencent is flat for the year. The Korean giants have been thriving on their exposure to the most advanced high-bandwidth memory chips that power world’s most-valuable AI company Nvidia and benefiting from demand from hyperscalers willing to pay the premium. A record shortfall in both DRAM and NAND has granted the two companies with unprecedented pricing power. However, some analysts also point out to the fact that there are risks associated with the Korean chipmakers’ undue exposure to the supply-demand cycles of memory chips, while the Chinese companies’ advantages on application may offer longer-term growth stability. “Memory chips have become critical strategic assets for US big tech companies, a major shift from earlier cycles when memory was simply a disposable component for PCs and smartphones,” said Simon Woo, head of Korea research at BofA Global Research in Seoul, who forecasts the memory supercycle to persist through 2027. “This shift has elevated the importance of the memory industry.”

What the changing Stock market equation tell about Chinese and Korean economies

As the Bloomberg report says, the change in rankings also highlight the different development paths pursued by the two Asian countries. While Korea has positioned itself as a key supplier of global industry leaders like Nvidia, China’s focus has been in achieving tech self-sufficiency. “Korea is really concentrated on a specific part of the tech supply chain, whereas for China, it’s more a story of a full end-to-end AI stack that they’re trying to build,” told Yiping Liao, portfolio manager at Franklin Templeton Global Investments to Bloomberg. “The reason Hynix and Samsung are seeing such phenomenal share price appreciation looks like is we are in an unprecedentedly tight memory cycle.”The semiconductor industry will account for around 60% of Korean stocks’ expected earnings growth this year, according to estimates by Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs Group Inc.In contrast to Korea’s heavy presence in the global AI scene, China’s vision for the industry is increasingly defined by domestic alternatives, as US export curbs limit access to advanced chips. While both Alibaba and Tencent too have been making their own foray into the AI industry, their focus remains on developing models to serve their core business. Speaking at a Politburo meeting last year, China’s President Xi Jinping pledged “self-reliance and self-strengthening” to develop AI in China. He said that China should leverage its “new whole national system” to push forward with the development of AI.“We must recognise the gaps and redouble our efforts to comprehensively advance technological innovation, industrial development, and AI-empowered applications,” said Xi, according to the official Xinhua news agency. Xi noted policy support would be provided in areas such as government procurement, intellectual property rights, research and cultivating talent.