EWY delivered a 92% rally in 2025 and is already up nearly 20% in 2026, making it one of the rare ETFs that can outpace the S&P 500 while trading at a steep valuation discount.
Performance snapshot and valuation gap
The iShares MSCI South Korea ETF (NYSEMKT: EWY) posted a 92% gain in 2025, driven primarily by the surge in memory‑chip makers Samsung and SK Hynix. Year‑to‑date through Jan 23, 2026, the fund is up 19.3%.
At the same time, EWY trades on a price‑to‑earnings (P/E) multiple of about 17, compared with the S&P 500’s 28‑multiple and the broader Korean index’s forward‑earnings multiple near 10. This valuation gap signals a sizable upside potential if earnings continue to accelerate.
Memory‑chip boom fuels the rally
South Korea houses two of the world’s largest DRAM producers—Samsung Electronics and SK Hynix. Their earnings exploded as AI‑driven data‑center demand lifted global memory prices. EWY’s top‑two holdings account for roughly 45% of the fund’s assets, providing a direct conduit to this growth.
U.S. rival Micron also saw triple‑digit earnings gains, underscoring the sector’s breadth. As long as AI infrastructure spending remains robust, memory‑chip margins are likely to stay elevated.
Currency dynamics and policy tailwinds
A persistently weak Korean won makes exports more competitive, boosting the earnings of Samsung, SK Hynix, and other exporters such as Hyundai Motor and Kia. Moreover, the current administration has introduced shareholder‑friendly reforms, including lower corporate tax rates on dividends and steps to improve corporate governance.
Risk factors to watch
- Memory‑chip pricing cycles can reverse sharply, leading to earnings volatility.
- Geopolitical tensions on the Korean peninsula could disrupt supply chains.
- Regulatory changes in the U.S. or Korea that affect export tariffs may impact profitability.
Investors should balance the upside from AI‑driven demand against the historically cyclical nature of the semiconductor sector.
Portfolio implications
EWY’s low valuation and strong earnings momentum make it a compelling satellite holding for investors seeking non‑U.S. exposure. Adding a modest allocation can diversify away from the S&P 500’s elevated valuations while capturing upside from the memory‑chip narrative.
Historically, international ETFs have delivered outperformance when U.S. markets are near historic highs. The iShares MSCI World ETF, for example, posted a 21% gain in 2025, reinforcing the case for global diversification.
Key holdings at a glance
- Samsung Electronics – 26.8% of assets
- SK Hynix – 18.3% of assets
- Hyundai Motor – exposure to EV and robotics
- Kia Corp. – expanding EV lineup
- Naver Corp. – Korea’s leading internet platform
Bottom line for investors
EWY’s combination of a 92% annual surge, a sub‑S&P 500 valuation, and exposure to high‑growth memory‑chip stocks positions it for another strong year. While sector volatility remains a concern, the macro tailwinds—AI demand, a weak won, and favorable policy—support continued upside.
For investors looking to capture growth outside the United States without picking individual stocks, EWY offers a concise, high‑conviction play.
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