Monetary Matters with Jack Farley
Monetary Matters with Jack Farley

The AI Chip Bubble: Why South Korea & Taiwan Are In the Danger Zone | Michael Fritzell | Asian Century Stocks

June 6, 2026

AI Summary

5 min read

In South Korea, analysts now project that SK Hynix and Samsung Electronics will generate $200 billion to $250 billion in net profit by 2028. That would make them the most profitable companies in the world—producing commodities. Michael Fritzell, author of Asian Century Stocks, calls this a bubble. He is not predicting when the memory chip cycle will turn, but he is confident that Chinese competitors, now highly profitable and improving yields, will bring new supply from 2027 onward. The lead time on supply response is the only real constraint. For Fritzell, buying commodity producers at 10 times book in this environment is not prudent.

The AI Trade and Speculative Fever

The AI theme has overwhelmed Asian equity markets over the past year and a half. The KOSPI, South Korea's main index, is now 50–60% weighted toward two memory chip stocks—SK Hynix and Samsung Electronics. Fritzell compares the local enthusiasm to the 1999 U.S. bubble: Korean retail investors are selling value stocks and doubling down on memory names. In Taiwan, the speculation is even more visible. Fritzell describes seeing stocks move sharply just by being mentioned as potential beneficiaries of data center construction, even when the actual business would be tiny. He notes that on Twitter, accounts that never existed before are suddenly all talking about K-lines and technical analysis. Average P/E ratio

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What you'll learn

  • 1 (00:00) **Bubble Warning on South Korea Memory Chips** - Michael Fritzell states that South Korean memory chip stocks (SK Hynix, Samsung) are in a bubble, with 2028 net profit estimates of $200-250 billion, which would make them the most profitable companies in the world despite being commodity producers.
  • 2 (03:40) **Speculation on the Ground in South Korea and Taiwan** - Describes extreme retail speculation in both markets, with the KOSPI now 50-60% weighted to two memory chip stocks and retail investors selling value stocks to double down on tech.
  • 3 (08:57) **How to Monitor the Memory Chip Cycle** - Recommends tracking enterprise DRAM spot prices daily via TrendForce in Taiwan as a warning signal; when the cycle turns, get out of those stocks.
  • 4 (11:33) **Western Investor Interest in Korea and Taiwan** - Interactive Brokers' opening of Korean stocks has drawn Western interest, but most retail investors stick to US tech like Micron; in Taiwan, they only want TSMC and ignore everything else due to invasion risk.
  • 5 (15:44) **Capital Market Reforms: Japan, Korea, and China** - Japan's bull market driven by weak yen and governance reforms (buybacks, cross-shareholding reduction); Korea is now following with inheritance tax reform, lower dividend tax, and director liability for related-party transactions.
  • 6 (21:20) **The Korea Discount and Chaebol Reform** - Explains the three structural issues behind the Korea discount: 50% inheritance tax (incentivizing low share prices), dividend tax, and lack of director liability for minority shareholders (fixed in 2025).
  • 7 (24:26) **Opportunities in Korean Small Caps** - The opportunity is across the board in non-tech sectors (consumer, industrials, software) that have been sold off as all focus is on memory chips.

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Show Notes

In this episode of Other People’s Money, host Max Wiethe sits down with Michael Fritzell, author of Asian Century Stocks, to break down the massive valuation divergence playing out across Asian equity markets. Michael explains why he believes the skyrocketing AI and memory chip sectors in South Korea and Taiwan have entered dangerous bubble territory, fueled by unsustainable profit estimates that ignore looming Chinese supply. Instead of chasing the tech hype, he highlights the massive upside hidden in overlooked South Korean small caps and Japanese growth stocks that are trading at single-digit multiples despite solid fundamentals. Tune in to discover how corporate governance reforms, insider buying trends, and a forming "New Cold War" are creating the ultimate stock-picker's market.


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Timestamps:

00:00 Korea Chip Bubble Warning

00:42 Why Asia Diverges Now

02:26 AI Mania Hits Korea

04:37 Bubble Case for Memory

06:40 China Supply Response

09:18 Memory Versus Logic Chips

11:33 Speculation on the Ground

13:41 Western Investors Pile In

15:44 Japan Reforms and Yen Boom

18:26 Korea Governance Fixes

24:20 Korea Small Cap Hunting

25:45 K Beauty and Cultural Exports

30:52 Finding Ideas Before The US

31:57 Nintendo Versus Memory Costs

33:19 Nintendo Release Drought

35:36 Switch 2 Execution Questions

37:39 Family Console vs Roblox

38:25 Iran War Energy Shock

41:50 India & China Underperformance

45:17 China Crackdowns Risk

50:42 The China Gray Zone Trade

54:25 New Cold War Lines

56:54 Hunting Value Across Asia

01:02:19 Reforms and Value Programs

01:04:06 How Much to Allocate to Asia

01:07:41 Where to Follow Michael

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