South Korea's Kospi Surges Over 16% as AI Stocks Rebound on Microsoft Earnings Optimism

SEOUL, July 31 (AP) — South Korea's benchmark stock market index jumped more than 16 percent on Friday, marking one of the sharpest single-day rallies in recent history as artificial intelligence-related stocks staged a dramatic recovery following earlier losses. The surge was driven by renewed investor confidence after Microsoft Corp reported strong earnings that signaled its massive investments in AI technology are beginning to yield substantial profits.

The Kospi index closed significantly higher on Friday, July 31, reversing steep declines seen earlier in the trading session when fears of an artificial intelligence bubble had prompted a sell-off. Traders who initially exited positions due to concerns over inflated valuations quickly returned as Microsoft's financial results provided concrete evidence that AI-driven revenue streams are viable and scalable.

The rebound was not isolated to Seoul. Regional markets showed signs of stabilization, with Tokyo's Nikkei index also posting gains in sympathy trading sessions. However, the magnitude of South Korea's rally stood out, reflecting the heavy weighting of domestic technology firms within the Kospi that have been aggressively pivoting toward AI infrastructure and software development.

Microsoft's earnings report served as a pivotal catalyst for the shift in sentiment. The tech giant disclosed revenue growth directly attributable to its cloud-based AI services, dispelling earlier doubts about whether companies could monetize their billions of dollars in generative AI spending. This validation encouraged investors to reassess risk profiles across Asian technology sectors.

Earlier in the day, volatility had been high as market participants weighed conflicting signals regarding the sustainability of current tech valuations. Some analysts warned that rapid price increases in semiconductor and software stocks indicated a speculative bubble similar to previous market cycles. These concerns triggered an initial wave of selling pressure before Microsoft's data points emerged late Thursday evening.

The Friday recovery suggests that while skepticism remains, investors are increasingly willing to bet on the long-term profitability of AI integration rather than short-term speculation. Major South Korean conglomerates with significant exposure to chip manufacturing and semiconductor equipment saw their share prices climb alongside the broader index.

Despite the robust gains, questions remain regarding how sustained this momentum will be in the coming weeks. Market observers are watching closely for further corporate earnings reports from other major technology players to see if Microsoft's performance is an outlier or a sector-wide trend. Additionally, regulatory developments concerning AI safety and data privacy could introduce new variables that might impact investor sentiment.

Trading volumes remained elevated throughout the session as institutional investors adjusted portfolios to capture the rebound momentum. The sharp reversal highlights the sensitivity of Asian equity markets to U.S. tech earnings and the ongoing narrative surrounding artificial intelligence as a primary economic driver for 2026.