Korea surpasses India as world's sixth-largest equity market amid AI-led rally: Jefferies

South Korea has overtaken India to become the world's sixth-largest stock market by capitalization, highlighting how the global artificial intelligence (AI) investment boom is reshaping capital flows and investor preferences, according to a new report by Jefferies.

The brokerage noted that Korea's stock market capitalization has climbed to $4.92 trillion, edging past India's $4.82 trillion and narrowing the gap with Taiwan's $5.26 trillion market. The surge has been driven by strong investor interest in AI-related technology and semiconductor stocks.

The report, titled The Battle for Capital and Fast Tracking, argues that AI remains the dominant theme in global markets, but warns that investors may be underestimating geopolitical risks and growing signs of speculative excess in parts of the technology sector.

Mega AI IPOs

Jefferies highlighted a wave of blockbuster IPOs expected in the United States, including SpaceX, OpenAI and Anthropic, which could attract enormous investor interest and potentially divert capital from other equity markets.

Among them, SpaceX is expected to raise around $75 billion at a valuation of approximately $1.77 trillion. The report notes that changes to US index inclusion rules could allow such mega-cap IPOs to enter major indices much faster than before, forcing passive funds to buy the shares and boosting demand.

Jefferies cautioned that these listings could "suck liquidity" from existing stocks, particularly AI-related companies that have already benefited from massive inflows.

AI mania

The report points to growing signs of speculative activity across Asian technology markets. In Korea, margin debt has surged 140% since the beginning of 2025, while investors have poured money into leveraged semiconductor ETFs linked to companies such as SK Hynix and Samsung Electronics.

One Hong Kong-listed leveraged SK Hynix ETF has amassed assets of more than $10 billion, making it the world's largest single-stock leveraged ETF.

At the same time, China is accelerating its push into memory chips. Jefferies highlighted upcoming IPOs of memory makers Yangtze Memory Technologies (YMTC) and ChangXin Memory Technologies (CXMT), which are expected to raise fresh capital to expand production and challenge global leaders such as Samsung, SK Hynix and Micron.

The report noted that China's integrated circuit exports jumped nearly 100% year-on-year in April, underscoring the country's growing semiconductor capabilities.

Geopolitics and energy issues

Despite the market's AI obsession, Jefferies warned investors not to lose sight of ongoing geopolitical risks. The report cited renewed tensions involving Iran and continued escalation in the Russia-Ukraine conflict as potential threats to markets and inflation.

As a hedge against these uncertainties, the brokerage continues to favour energy exposure, arguing that developments in both regions could have significant implications for global commodity prices.

While AI remains the market's primary growth story, Jefferies suggests that the battle for global investment capital is entering a new phase, where mega IPOs, semiconductor competition, geopolitical tensions and shifting market leadership will increasingly influence investor returns.