Good morning, investors. We spend enough time talking about the Federal Reserve and its rate hikes and rate cuts that it’s easy to forget that other country’s central bank decisions could have just as severe an impact on asset prices.

We could see the clearest example of this in South Korea later this year.

The global AI trade is built on South Korea and policymakers know it. 

With Korean stocks at record highs and more than tripling over the last two years, Seoul’s new central bank chief said Thursday that the boom outweighs any economic headwinds from the Middle East. 

The KOSPI has gained 94% so far this year, while the iShares South Korea ETF (EWY) is up over 100% even as the Korean won trades at its weakest level against the dollar since 2008.

Nearly all of those gains can be attributed to SK Hynix and Samsung, the country’s two trillion-dollar high-bandwidth memory giants that have become fixtures in the AI supply chain.

Nvidia and just about every other hyperscaler and AI company in the world has scrambled to their doors as demand far outpaces supply.

"Asia's fourth-largest economy increasingly resembles a giant leveraged bet on AI," according to Ed Yardeni of Yardeni Research. 

He compared the current rally to South Korea’s 1996 setup, which saw a similar runup just before an epic crash. 

But this time, if the AI euphoria really can sustain itself, the rally may not have a clear end point. 

Indeed, South Korea’s exports surged nearly 50% last quarter, with computing equipment and semiconductors up more than 300% and 200%, respectively, compared to a year ago, plenty enough to offset a double-digit drop in auto exports.

On Thursday, the Bank of Korea held interest rates steady in its first announcement under its new governor Shin Hyun-song, who forecasted that chip sales would push economic growth much higher than anticipated. 

Policymakers do, however, see rates rising to 3.0% within six months. 

That introduces a new but familiar risk to the global AI trade.

As the Federal Reserve has taught US investors time and time again, even marginally tighter borrowing costs can deflate asset price bubbles.

Putting aside concerns around suspect hyperscaler spending, circular financing or overbought conditions, that means any hawkish signals out of Seoul could present the most pressing issue yet for the AI trade.

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🏦 The labor market is still in “decent shape.” That’s according to Minneapolis Fed President Neel Kashkari, who said that inflation is the bigger priority right now and that consumer prices are still “much too high.” (CNBC)

📈 Snowflake stock climbed 36% after beating earnings expectations. It signed a $6 billion AWS deal and forecasted rising enterprise AI adoption, with a renewed push into generative and agentic AI products. (Reuters)

🚢 How long can Iran withstand economic pain? Tehran is weighing concessions with the US given the pain of the US naval blockade, and pressure it ramping up to negotiate a peace deal quickly. Oil export revenue has been choked off and millions of Iranians are jobless. (WSJ)

📊 Marvell posted a record $2.42 billion quarter and lifted its full-year outlook. Data center revenue jumped 27% year over year and the company guided second-quarter sales above consensus, though the stock still fell 4.5%. (Simply Wall St)

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🗓 May 28, 1962: The Dow Jones Industrial Average plunged 5.7% on what became known as the “Kennedy Slide,” its worst single-day drop since 1929, following President Kennedy's clash with US Steel over price hikes.

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