Stock markets occasionally produce a particular kind of paradox: a company earns more money, yet its shares fall. In 2026, South Korea's four largest entertainment groups find themselves in precisely that position.

BTS has returned as a complete unit for the first time in six years. Big Bang—the veteran group whose members include G-Dragon—has announced a 20th-anniversary world tour. South Korean television-format exports have, for the first time, surpassed $100m. The combined operating profit of the industry's four giants—HYBE, SM Entertainment, JYP Entertainment and YG Entertainment—is forecast to approach 1 trillion won ($720m) for the year.

And yet HYBE's share price is drifting 42% below its peak for the year. SM, JYP and YG have all retreated even as the KOSPI, South Korea's main stock index, has broken successive all-time highs. Retail investors are openly asking why BTS's return has done nothing for the shares. The frustration is understandable.

A hierarchy built by artificial intelligence

To make sense of this paradox, one must first understand what the market currently wants. The answer is straightforward: semiconductors. The explosion in AI infrastructure investment has made high-bandwidth memory (HBM) and AI chips indispensable—you simply cannot build AI without them. SK Hynix and Samsung Electronics have been reclassified as critical suppliers to an essential industry, and capital has flooded towards them accordingly. The Korea Exchange's content-sector index is the only thematic index to have posted negative returns so far this month.

Entertainment companies have been quick to announce AI-platform initiatives—HYBE's fan-community app Weverse has introduced AI curation; SM is developing AI avatars—but the market has greeted these moves with indifference. Such features are "nice to have", not "cannot do without". The gap between semiconductors and entertainment is not a technology gap; it is the gap between a staple and a discretionary good.

Dissecting the discount

The sector's troubles are not purely the result of being crowded out by semiconductors. Self-inflicted wounds compounded the problem. For entertainment companies, 2025 was a difficult year. Key artists were absent for extended periods, album sales declined, and marketing costs surged. HYBE and YG both delivered earnings that fell short of expectations. The public dispute involving girl group NewJeans damaged HYBE's brand. SM was widely judged to lack a bankable act capable of headlining a major tour. Brokerages cut their target prices in succession.

JYP is a striking case. Despite forecasts that it will report record operating profit this year, analysts at Hana Securities noted that its share price does not reflect the performance of a company about to deliver its best-ever results. The gap between fundamentals and valuation is already substantial.

Three catalysts for a rerating

There are, nonetheless, three reasons to take a fresh look at the sector.

The first is BTS. The group's world tour, which began at Goyang Stadium in April, spans 79 shows across 34 cities worldwide. Attendance is projected at 3.5m to 4m—enough to set a new record for a K-pop act. Samsung Securities forecasts HYBE's operating profit will reach 480.7bn won this year, a 677% increase on the previous year. A single act, in other words, is generating revenues comparable to the combined sales of JYP and YG. Concert income is further leveraged by merchandise sales, content licensing and platform revenue through Weverse.

The second catalyst is Big Bang. Through what it calls "YG Plan 2026", YG Entertainment has confirmed a global tour to mark the group's 20th anniversary. Big Bang will perform as a three-piece comprising G-Dragon, Taeyang and Daesung. Their return is seen as a moment capable of stirring markets not just across Asia but in North America and Europe. A year in which both BTS and Big Bang perform simultaneously has no precedent in K-pop history.

The third factor is China. Expectations of a formal lifting of the so-called hallyu ban—China's informal restrictions on South Korean cultural exports, imposed since 2017—have revived. Dream Concert 2026 is scheduled in China in February next year and is to be broadcast on local television; the fact that it is a co-production with a Chinese promoter distinguishes it from the one-off events that preceded it. A full reopening of the Chinese market would represent a structural step-change in the earnings of all four companies.

What the market has not yet priced in

Entertainment possesses one quality that semiconductors do not: fandom. Fan communities are largely recession-proof, cross borders freely, and convert into digital revenue through streaming and platform subscriptions. The crossing of the $100m threshold in television-format exports, the spread of the Korean wave into Latin America and the Middle East, a Netflix original animation based on a K-pop group returning to cinema screens—these are dimensions of the K-culture ecosystem that do not show up neatly in quarterly numbers.

The market is presently too busy watching semiconductors to watch entertainment. But in a year when the four major labels are approaching a combined operating profit of 1 trillion won, when BTS and Big Bang are both on the road, and when a Chinese market reopening is more plausible than at any point in the past decade, continued indifference to the sector carries its own risks. If semiconductors are the industry the world cannot do without, entertainment is the industry that changes what the world feels like. That world is opening up again.

*Watch for: the reflection of BTS world-tour revenues in HYBE's second-quarter results (due in July); the commercial performance of the Big Bang tour; and the announcement of specific details surrounding Dream Concert 2026 in China.*

**HYBE** | **SM** | **JYP** | **YG**

Key catalyst | BTS world tour (79 shows) | Growth in back-catalogue merchandise | Record operating profit forecast | Big Bang 20th-anniversary tour

Key risk | 42% off peak; demanding valuation multiple | No headline act for major tour | Delayed IP expansion in Western markets | Uncertainty over G-Dragon's status

2026 operating profit forecast | 478.5bn–480.7bn won (+677%) | 36.7bn won (Q1 only) | Record high | 18.5bn won (Q1) → sharp acceleration in H2

Shared upside | Lifting of China's hallyu ban and market reopening | ← | ← | ←