Hedge funds, including Britain's Man Group and Singapore's FengHe Fund Management, are investing in South Korean chipmakers like SK Hynix and Samsung Electronics.
These investments are driven by a new wave of demand for high-end memory chips and government spending, positioning South Korea as a key player in the AI sector.
The South Korean government has introduced a 26 trillion won ($19 billion) support package for the chip industry, along with a 'Corporate Value-up Programme' to boost shareholder returns.
The influx of hedge fund capital has helped South Korea's benchmark KOSPI index achieve its best month in seven months as of June.
Despite risks such as a depreciating Korean won and short-selling restrictions, South Korea's stocks have attracted strong inflows, marking the biggest since 2008.