The wealth-generating wave driven by AI collided with market volatility, yet it could not quell the appetite of Asia's affluent for jewelry and watches. Recent signs show that household wealth in South Korea and Japan, inflated by AI-related stocks, continues to flow into luxury counters - even as the overall market no longer keeps rising.

South Korea is the most acute example. Earlier this year, tech companies such as Samsung Electronics and SK Hynix led a historic stock market surge, causing household net worth to swell; afterward, the market turned volatile, yet consumption proved more resilient than expected. Rajiv Biswas, CEO of Asia Pacific Economic Company, pointed out the chain: strong revenue from tech companies not only paid high bonuses and dividends but also created a wealth effect from rising stock prices, which together supported consumer spending in the first half of 2026. In a report dated September 17, Morgan Stanley's chief economist for South Korea and Taiwan, Catherine Wu, noted that Korean consumption slowed in July but rebounded in September. The firm attributed part of this decline to market fluctuations, but emphasized that consumer confidence in spending recovery remained strong. Based on stronger household income, fiscal support, increased wealth, and inbound tourism, Morgan Stanley raised its private consumption growth forecast for this year from 2.2% to 2.6%.

Department stores have become the thermometer of this resilience. According to Bank of America data, the leading luxury department store in South Korea, Shinsegae, saw a 15% year-on-year increase in same-store sales in August, with luxury sales up 20%, and international customer revenue jumping 82%. This trend aligns with Bank of America's findings in previous cycles: South Korean department store sales often follow household stock investments, with the two showing the tightest correlation after a lag of about one year. Luxury groups have also confirmed that demand remains strong - LVMH saw robust growth in Asian regions outside Japan in the first half of the year, with Bernard Arnault specifically highlighting Louis Vuitton's "outstanding performance" in new stores in Seoul and Beijing as one of the reasons for the second-quarter acceleration; Richemont reported a 21% increase in Asia-Pacific sales for the quarter ending June, with South Korea and Taiwan being the brightest markets.

However, the heat is now testing the edge of a cooling trend. Luxury sales and the stock prices of major South Korean department store operators once soared along with the overall market, but JPMorgan's assessment on September 18 was that "demand is no longer universally strong, but it hasn't collapsed." Analysts added that since July, luxury demand has already cooled down due to increased volatility, though jewelry, watches, and top brands have held up longer than the overall category.

The rise in stock prices is just one channel through which the AI boom has benefited South Korean households. Morgan Stanley now expects the massive profits from the semiconductor industry in South Korea to spread more widely through investment, government fiscal policies, and household income. Its exact words were, "South Korea is about to monetize the semiconductor supercycle on an unprecedented scale and duration," and the benefits may spread throughout the economy over the next three to five years. Employee salaries are a more direct channel: the firm estimates that total employee compensation from Samsung Electronics and SK Hynix this year could reach 66.7 trillion won, rising to 107.6 trillion won in 2027 and further to 114.9 trillion won in 2028. The average annual cash bonus size during 2026-2028 could be about 20 times that of 2025. This means that even if stock price increases become less reliable, there is still a source of consumption unaffected by market fluctuations that continues to fuel demand.

Japanese high-end retailers have also seen wealthy domestic customers spending, as the Japanese stock market has also performed well this year, with AI-related chip and equipment manufacturers among the biggest winners. Takashimaya saw a 3.9% year-on-year increase in in-store sales in August, while Richemont reported a sharp 36% increase in sales in Japan for the quarter ending June, driven by both domestic customers and tourists. Hermes also saw an 11% increase in sales in Japan for the first half of the year, calculated at constant exchange rates. Biswas warned that the AI wealth effect may be more limited in Japan, as most Japanese households have low direct exposure to the stock market, with their assets firmly focused on low-risk fixed-income products.

When the computational ambitions of AI turn into paychecks and stock prices, the first things to be rewritten are often the price tags on counters and the skylines on the streets.