If oil moved the world in the past, semiconductors will be at the center of the market in the AI era | Song Jaekyung, CEO of Dimension Investment Advisory [Yeouido Insight]

Summary

Song Jaekyung discusses the conflict between macro headwinds (rising oil, rates, inflation) and strong equity market momentum driven by AI and semiconductor earnings. He warns that oil could spike to $160-170 due to supply disruptions, making commodities a key risk. He is extremely bullish on Korean semiconductors as the new 'oil' of the AI era, but cautions that a wave of mega IPOs may drain liquidity and weaken US equities. He advises balanced portfolio rebalancing rather than concentrated bets.

• Rising oil prices and interest rates pose a growing macro threat to equity markets despite strong corporate earnings.
• South Korea's bond yields have risen sharply, now near US levels, reflecting higher growth and inflation.
• AI-driven semiconductor demand is structurally bullish for South Korea, home to two of the world's most profitable chip companies.
• Semiconductors are compared to oil as a foundational economic input, with huge room to grow in GDP share.
• Big Tech's free cash flow is under pressure from massive AI capex, making them interest-rate sensitive.
• A series of mega IPOs (SpaceX, Anthropic, OpenAI) totaling trillions of dollars may strain market liquidity similar to past patterns.
• The speaker advocates for regular portfolio rebalancing and diversification to manage volatility.
• Oil supply disruptions from the Strait of Hormuz could drive prices to $160-170 or higher, with limited near-term solutions.