South Korea halts trading as AI chip selloff batters stocks
What's the story
South Korea's benchmark Kospi index has witnessed a massive fall of over 11%. The decline has led to a market-wide trading halt for the second consecutive session. The downturn was triggered by disappointing earnings from memory chip giant SK Hynix, which intensified a selloff in AI-linked technology stocks. The sharp drop is one of the worst in South Korean stock market history, with investors rushing to dump semiconductor shares amid fears that expectations surrounding the AI boom have become overstretched.
Market impact
Kospi on track for worst monthly performance
The Kospi Index fell as much as 11% during the session after dropping nearly 10% on Tuesday. This prompted authorities to activate a circuit breaker that temporarily halted program trading.
The benchmark has now slumped over 30% this month and is on track for its worst monthly performance on record after posting one of the world's strongest rallies earlier this year.
Corporate performance
Selloff led by SK Hynix and Samsung Electronics
The latest selloff was led by SK Hynix and Samsung Electronics, South Korea's two biggest chipmakers.
The former's shares tumbled after reporting earnings that failed to meet investors' lofty expectations, despite strong demand for high-bandwidth memory (HBM) chips used in AI servers.
Meanwhile, Samsung Electronics extended losses as investors broadly reduced exposure to semiconductor stocks amid fears of a slowdown in the AI investment cycle after an explosive rally over the past year.
Investor behavior
Retail, institutional investors cut exposure to tech shares
The two companies account for a significant share of the Kospi's market capitalization, making the broader index especially vulnerable to swings in chip stocks.
Retail investors have added to the selling pressure by cutting positions in technology shares, while institutional investors have also pared exposure amid mounting uncertainty over AI-related valuations.
This comes after weeks of weakness in global technology stocks, with investors increasingly questioning whether the pace of spending on AI infrastructure can be sustained.
Market dependency
South Korea's stock market dependence on semiconductor industry
The record monthly decline highlights the extent to which South Korea's stock market has become dependent on its semiconductor industry.
Weakness in just a handful of technology companies is dragging down the broader market.
Earlier this year, South Korea was one of the world's best-performing equity markets, driven by optimism surrounding AI and demand for advanced memory chips.
But sentiment has reversed sharply in recent weeks as investors reassessed growth expectations and booked profits after the sector's remarkable rally.