The AI boom has created new stock market winners

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

The first half of the year brought dramatic shifts across global equity markets. Some stock exchanges surged at an unprecedented pace, fueled in part by the artificial-intelligence boom, while others struggled with investor outflows and weak corporate earnings. Here is an overview of the most important stock-market trends around the world.

The midpoint of the year is a good time to take stock of developments in global equity markets. This year's moves have been unusually large and rapid. A bull market has taken hold across the vast majority of exchanges, although a handful have experienced sharp sell-offs. Many of these developments reflect broader economic trends.

The AI boom is powering stock markets

The best-performing stock-market indices this year have been South Korea’s KOSPI and Taiwan’s TAIEX. Since the start of the year, they have gained 64% and 58%, respectively. By the end of the year, the Korean index had at one point been up more than 120%, but it has given back nearly half of those gains in recent weeks.

The extraordinary rally has been driven by massive investment across the entire artificial-intelligence value chain. In the case of the KOSPI, the surge was largely fueled by two companies – Samsung and SK Hynix. Both have benefited from booming demand for High Bandwidth Memory (HBM) chips. At their peak, the two companies together accounted for half of the total market capitalization of the Korean stock exchange.

Meanwhile, the main driver behind the TAIEX's rise has been TSMC, the semiconductor manufacturer. Since the beginning of the year, the company's shares have risen by more than 50%. It now represents almost half of the Taiwanese stock market's total market capitalization.

Such spectacular gains naturally raise the question of whether markets are entering bubble territory. The answer depends on how one defines a bubble. These price increases are not entirely detached from fundamentals. They are supported by the very real profits these companies are expected to generate over the coming quarters. Even so, it is difficult to imagine demand for their products remaining at today's exceptionally high levels indefinitely. The market appears to be gradually recognizing this. South Korea has already undergone a sharp correction and, using the strict definition of the term, has entered a bear market, defined as a decline of at least 20%. The coming months may test investors' confidence in the sustainability of these elevated earnings.

Poland remains among the world's best performers for a second straight year

Poland's stock market has also performed strongly this year. The WIG, the broad-market index, has gained more than 22% since the start of the year. This marks the second consecutive year in which Polish equities have ranked among the world's top-performing markets.

The rally has been driven primarily by large- and mid-cap companies. The WIG20 has risen by nearly 20% this year, largely thanks to the strong performance of Orlen, which has benefited from higher oil prices. Since the beginning of the year, the company's shares have climbed 60%. Banks have also posted robust gains: PKO BP is up nearly 30%, Pekao has gained 26%, Erste and Alior Bank have each advanced 38%, while mBank has risen 35%. Other large companies from a range of sectors have also performed well, including Allegro (e-commerce), Żabka (retail chain), and Budimex (construction). Meanwhile, the mWIG40 index has gained 22% since the beginning of the year.

Smaller companies have fared much less well. The sWIG80 has risen by just 4% so far this year.

The gains on the Warsaw Stock Exchange (GPW) reflect the strength of the Polish economy, which has supported the performance of listed companies. They have also been driven, to a significant extent, by increased inflows of foreign capital into the Polish market.

The region is performing strongly as well

The bull market on the Warsaw Stock Exchange (GPW) is far from an isolated case. Europe's best-performing equity index this year has been Romania's BET, which tracks the country's 20 largest listed companies. Over the past six months, it has gained 42%, despite Romania's economy remaining largely stagnant. As in Poland, the rally has been driven primarily by strong gains in banking stocks.

Hungary’s BUX has also delivered a robust performance, rising nearly 20% since the start of the year. The gains have been fueled by the country's change of government and the resulting inflow of foreign capital. Investors are betting on an improvement in the economy, supported by the release of previously frozen European Union funds and a reduction in political influence over state-controlled companies. That scenario is already beginning to unfold.

U.S. markets remain on an upward trajectory

U.S. equities have also continued to advance, with the major indices posting solid gains. The Nasdaq, which is heavily weighted toward technology stocks, has risen 17% since the start of the year, while the S&P 500 is up nearly 10%.

Unlike in recent years, this year's rally has been less dependent on the Magnificent Seven – the seven largest U.S. technology companies. Two of those stocks are in negative territory for the year: Microsoft has fallen by more than 18%, while Tesla is down 9%. Meta is trading broadly in line with where it started the year. The remaining companies have posted gains, but only Apple has significantly outperformed the S&P 500 since the beginning of the year. Nvidia, Alphabet (Google), and Amazon have each gained around 10%.

That appears to be a healthy development after several years of exceptionally strong gains. It also suggests that, at least for now, U.S. equity indices can continue to rise even if the market's largest companies deliver more modest performance.

By contrast, Europe's leading equity markets have largely moved sideways. Germany's DAX has gained just 3% since the start of the year, while France's CAC 40 is up 2%. The UK's FTSE 100, which tracks the largest companies listed in London, has risen by just under 6%.

The losers at mid-year

The worst-performing market this year has been Indonesia, where equities have fallen by more than 30% over the past six months. The decline has been driven largely by institutional concerns, including a lack of transparency around ownership structures, as well as the dominance of state and local oligarchs in corporate ownership. As a result, foreign investors have begun pulling capital out of the market.

Chinese equities have also struggled. Hong Kong's Hang Seng Index has fallen by more than 7% since the start of the year, while the Shanghai Composite is down around 1%. Despite the impressive international expansion of Chinese companies, their financial performance has often remained weak. This is because overseas growth has frequently been pursued at the expense of profitability, while domestic demand in China remains subdued and competition is exceptionally intense. China is, however, gradually emerging from deflation, which could translate into improved corporate earnings.

The artificial-intelligence boom is driving the world's top-performing markets. The strongest gains have been recorded by stock exchanges in South Korea and Taiwan, where investors are betting on companies producing HBM memory chips and processors used in AI applications. While the rally is supported by improving corporate earnings, questions are emerging over its sustainability, with the sharp correction in the Korean market serving as the first warning sign.
Poland and Central and Eastern Europe rank among the strongest-performing equity regions. The WIG has remained among the world's top performers for the second consecutive year, supported by the resilience of the Polish economy and increased inflows of foreign capital. Stock markets in Romania and Hungary have also performed well, although their gains have been driven by different economic and political factors.
Other markets present a more mixed picture. In the United States, indices continue to rise, but the rally has broadened beyond the largest technology companies, while major Western European exchanges remain largely range-bound. The weakest performances have come from Indonesia and China, where investors are being weighed down by institutional challenges, weak domestic demand, and low corporate profitability.