Why the Taiwan Dollar and South Korean Won Are Rallying on AI Chip Demand

AI-driven economic super-cycle. Taiwan's Q1 2026 GDP was revised sharply upward to 146% year-on-year — the highest growth rate since 1987 — fueled almost entirely by AI semiconductor demand . The TAIEX hit new record highs driven by TSMC and the AI craze .

What's Driving the South Korean Won Higher

The won gained nearly 8% against the dollar in July 2026, making it the world's best-performing currency that month . The rally extended into August, with USD/KRW retreating nearly 8.9% from its July high .

Massive foreign inflows into chip stocks. Foreign investors poured over 2 trillion won (roughly $1.5 billion) into Korean equities in a single day on July 23, 2026, on AI chip optimism . The KOSPI surged more than 3% in a single session on August 12, led by a "surge of foreign funds" into Samsung and SK Hynix . Foreign investors were net buyers of more than 3.4 trillion won on that day alone .

Record chip export earnings. South Korea's exports grew at the strongest annual rate in over four decades in May 2026, driven by AI chip sales hitting records . Commerzbank notes that the won's strength is supported by both exporters' repatriation and foreign portfolio inflows .

The "Great Reversal" of the won. In addition to chip export cash, SK Hynix's ADR listing on the Nasdaq was expected to bring up to $30 billion in additional capital inflows tied to the AI theme . The KOSPI has rebounded 29.5% from its July 30 low, supported by strong tech earnings .

The Role of AI Chip Demand and the Key Companies

TSMC as the linchpin. TSMC is the sole manufacturer of the most advanced AI accelerators used by Nvidia, AMD, and Apple. Its stock has been a primary vehicle for foreign investors seeking AI exposure, and TAIEX record highs have been directly linked to TSMC's performance . The AI export boom has pushed Taiwan's current account surplus toward 20% of GDP .

South Korea's memory chip duopoly. Global hyperscalers racing to build AI data centers created an explosion in demand for High Bandwidth Memory (HBM), which is dominated by SK Hynix and Samsung Electronics . The KOSPI vaulted past 7,000 for the first time in May 2026 as Samsung Electronics crossed a $1 trillion market cap .

The Two-Way Currency-Equity Feedback Loop

Foreign buying of chip stocks strengthens the won and TWD. A stronger currency then makes these markets more attractive to additional foreign capital. Meanwhile, the chip giants' record earnings get repatriated and converted, adding further upward pressure — creating a self-reinforcing cycle .

The Most Important Caveat

Despite the rally, Reuters reported on July 1, 2026, that foreign investors sold Asian equities at the fastest pace in 16 years in the first half of 2026, with Taiwan and South Korea seeing the heaviest outflows . This happened paradoxically because the AI rally had made those positions so profitable that investors were trimming winners . The currency strength has been driven by a combination of export repatriation flows and periodic re-entry by foreign investors, not a steady linear accumulation.