Korean investors poured $800B into U.S. equities since April. Now the won is strengthening, and the semiconductor unwind is accelerating, Kramer says.
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Semiconductors sold off again Wednesday. The Korean won kept climbing. Michael Kramer, an independent macro and options researcher, sees a direct link.
Korean investors poured into U.S. equities starting in April 2025, pushing cumulative holdings from roughly $200 billion to about $800 billion by June, Kramer wrote. The won was weak over that stretch. Semiconductor stocks rallied hard. The inverse relationship held: a softer won lined up with stronger chip names.
Now the won is reversing. Korea's two-year government bond yield rose to roughly 3.71%, and the 10-year yield sits above 4.3%. The interest rate gap between the U.S. and Korea has narrowed sharply, Kramer noted. Markets expect the Bank of Korea to keep raising rates over the next six months. That has pushed the won higher against the dollar.
For Korean investors who bought U.S. assets without hedging currency risk, the reversal stings. They are losing on the dollar's decline against the won. Many of those same investments – particularly in AI and semiconductor stocks – are also falling. Adverse currency translation plus declining asset prices can turn a profitable trade into a painful one fast, Kramer said.
Credit default swaps suggest the unwind is not finished, he added. The market is rotating from semiconductors into software, repricing the AI complex as the currency tailwind fades.
"If the Korean won continues to strengthen against the dollar, the AI trade is likely to continue unraveling," Kramer wrote.
The won's path now depends on the Bank of Korea's rate decisions and the trajectory of U.S. yields. For investors holding unhedged Korean exposure to NVIDIA and other chip names, the currency risk has become the dominant variable.
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