KOSPI surged 14 percent on Thursday, marking its biggest one-day rebound on record. Foreign investors' buying was cited as the main force behind the move.

On July 31, CNBC reported that South Korean stocks, which had recently tumbled, quickly reversed course after U.S. tech shares rebounded and expectations for AI semiconductors recovered. By London Stock Exchange Group (LSEG) data, the KOSPI posted its biggest one-day rise, while SK Hynix staged a record rebound. Samsung Electronics also rose sharply.

The immediate trigger was earnings from large U.S. tech companies. Results from Microsoft, Amazon and Meta came in stronger than market expectations, reviving hopes that demand for AI infrastructure investment remains solid. Choi Tae-won (최태원), chairman of SK Group, also said he bought SK Hynix shares, improving investor sentiment toward the world's No. 2 memory chipmaker.

Yoon Jeong-in (윤정인) of Fibonacci Asset Management said South Korean stocks have swung between fear and optimism almost overnight, and Thursday's rise appeared to be a sharp reversal after excessive selling. He pointed to foreign investors as the key driver of the rally. Short-covering and mechanical rebalancing by leveraged exchange-traded funds were also cited as factors that amplified the gains.

New cash-deposit requirements for leveraged ETF investors that took effect from July 31 may also have influenced position adjustments. Yoon said gains of this magnitude would not continue, but added that positions had been extremely tilted to the bearish side and that SK Hynix's underlying fundamentals for AI memory remain strong. He said the real test will be whether foreign buying continues after short-covering eases.

The rebound came just days after South Korean stocks were swept by heavy selling. At the time, selling pressure spread across global semiconductor shares as concerns that AI-related stocks had risen too much combined with rising leverage and signs of forced liquidations.

Rolf Bulk (Rolf Bulk), a semiconductor analyst at Fureum Group, said the recent rally reflects restored confidence that the AI investment cycle is still intact rather than a fundamental shift in the industry. He said volatility in South Korean stocks has grown to an unprecedented level over the past month, and that this rebound was the result of that trend being concentrated on the last trading day. He added that most recent forced selling appears to have largely ended and there are no signs that AI infrastructure buildouts are slowing.

Others warned it is difficult to see Thursday's surge as a trend reversal. Paul Gambles (Paul Gambles), co-founder of MBMG Family Office Group, said such a sharp rise could be another violent move repeating in an unstable market. He said it shows asset prices are completely detached from fundamentals and that massive leverage has built up across markets. He warned the rise could end as a one-day relief rally or continue a bit longer, but should not be taken as a sign risks surrounding the AI boom have disappeared. He said the combination of leverage burdens and fragile investor sentiment could lead to a larger market correction.

Attention is now shifting to foreign fund flows. The rebound could extend if overseas money continues to buy South Korean stocks even after the short-covering effect fades. If buying loses momentum, the surge may end up as another sharp swing in South Korea's stock market, which is cited as one of the most volatile in the world.