Beyond Chips: Why Kia and South Korea's ETF Deserve Your Attention in 2026

The iShares South Korea ETF (EWY) has become one of the most compelling investment stories of recent years, and investors exploring opportunities beyond the U.S. market are increasingly taking notice. While many focus on the spectacular gains in memory chips, the real story is more nuanced—it’s not just about Samsung and SK Hynix anymore. Companies like Kia Motors represent a broader shift in how investors should think about South Korean equities heading into 2026.

The numbers tell a dramatic story. The EWY surged 92% last year, and momentum has carried into 2026, with the fund already up 19.3% year-to-date as of late January. For context, this outpaces the broader U.S. market by a significant margin, raising an important question: Is this a one-trick pony driven by semiconductor volatility, or is there a deeper opportunity?

The Memory Chip Boom That’s Driving Everything

The AI infrastructure explosion has fundamentally reshaped demand for memory components, and South Korea’s two dominant chipmakers—Samsung and SK Hynix—have been perfectly positioned to capitalize. These two companies alone account for 45% of the EWY’s holdings, with Samsung at 26.8% and SK Hynix at 18.3%.

The tailwinds have been substantial. Memory chip prices jumped dramatically as AI data center demand surged, and even U.S.-based Micron Technology experienced triple-digit growth last year. However, South Korea’s story extends beyond just riding this semiconductor wave. The Korean won has weakened against the dollar, making exports more attractive on the global stage. This currency advantage has amplified returns for international investors.

What’s particularly striking is the valuation picture. As of late January, the EWY traded at a price-to-earnings ratio of 17—roughly 40% cheaper than the S&P 500’s multiple of 28. On a forward-looking basis, Korean stocks trade at approximately 10x earnings, suggesting the market hasn’t fully priced in the AI boom’s potential.

Samsung, SK Hynix Lead, but Kia Motors Signals the Broader Opportunity

While memory chips dominate the headlines, the ETF’s composition reveals a more diversified play than many realize. Kia Motors exemplifies this evolution. The company has emerged as a formidable player in electric vehicles and maintains an 80% stake in Boston Dynamics, the advanced robotics firm that some analysts believe leads Tesla in humanoid robot development.

This holding is significant because it shows how South Korean companies are competing across multiple innovation frontiers—not just in chips, but in the technologies that will define the next decade. Kia’s strategic bets demonstrate that the country has moved beyond being a single-sector economy.

Other notable holdings reinforce this diversification narrative. Hyundai Motor, Kia’s sister company in the broader Korean automotive ecosystem, is also gaining traction in EVs. Hanwha Aerospace, a leading supplier to global heavyweights like GE and Rolls-Royce, provides exposure to the defense and aerospace boom. Naver, often called the Korean Google, offers tech platform exposure with search, mapping, and e-commerce services.

Valuation Gap: Why the EWY Trades at Half the Price of the S&P 500

The valuation discount becomes even more compelling when you consider the policy backdrop. President Lee Jae Myung’s administration has implemented shareholder-friendly reforms, including improvements to corporate governance and a reduction in the top dividend tax rate from 50% to 30%. Proposed inheritance tax reforms could further unlock valuations by making long-term ownership more attractive.

This policy environment matters because it addresses a historical overhang—Korean stocks had underperformed for years, which meant valuations had compressed relative to fundamentals. Now, with positive policy momentum and strong earnings visibility from the AI boom, the discount looks increasingly unjustifiable.

Compare this to the S&P 500, which trades near historically elevated valuations. The international diversification play, which the iShares MSCI World ETF demonstrated convincingly last year with a 21% gain, is increasingly difficult to ignore.

From AI Infrastructure to Automotive Innovation

The EWY’s exposure spans multiple structural tailwinds. AI infrastructure spending remains robust, memory chip demand shows no signs of slowing, and the electric vehicle transition is accelerating. Kia’s positioning within this ecosystem—both as an EV manufacturer and through its Boston Dynamics stake—creates optionality that extends well beyond traditional automotive.

The robotics angle deserves emphasis. If Boston Dynamics achieves meaningful commercial adoption of humanoid robots, Kia’s 80% ownership could represent a massive wealth creation opportunity for EWY shareholders. This isn’t pure speculation; it’s a real strategic asset held by a company increasingly visible in the EV revolution.

Timing the South Korea Play

One important caveat: Memory chip stocks have historically been cyclical and volatile. The sector can experience sharp reversals when supply catches up with demand or when macro conditions shift. The EWY amplifies this risk through its heavy concentration in Samsung and SK Hynix.

However, the breadth of the fund—with meaningful positions in autos, defense, aerospace, and tech platforms—provides a natural hedge against pure chip cyclicality. This balance between high-growth exposure and diversification makes the current setup arguably more attractive than at any previous point.

For investors seeking exposure beyond the U.S. at a time when domestic valuations have reached extremes, the South Korea ETF offers a compelling risk-reward setup. The combination of deep discounts, policy tailwinds, structural growth drivers, and diversified holdings through companies like Kia creates a case worth considering. The 2026 outlook for this fund remains constructive as long as AI infrastructure demand sustains and Korean companies continue executing on their strategic initiatives.