South Korea’s stock market was forced to slam the brakes on Tuesday morning after the benchmark Kospi index slid by 8% in a matter of hours — a sell-off fuelled by deepening jitters over artificial intelligence spending. Trading was paused for 20 minutes under a circuit breaker mechanism designed to calm panic, but when it reopened the index kept falling, closing 10.8% lower.
The slump was led by technology giants Samsung Electronics and SK Hynix, both of which tumbled by more than 13%. The rout in Asia came a day after AI chip giant Nvidia lost 5% in New York, surrendering its position as the world’s most valuable listed company to Apple.
“South Korea's Kospi halted after 8% slide; chip stocks led by Samsung and SK Hynix fall over 13%.”
The Kospi has been halted multiple times this year. The index more than doubled between January and mid-June but has since lost roughly a third of its value. South Korea’s market has been particularly volatile in recent months as it attracted large numbers of retail investors.
Jane Sydenham, investment director at Rathbones, said the Asian market slump came after “phenomenal rises” over the last few months. She noted that the Korean market is “very concentrated” in Samsung and SK Hynix, both of which fell sharply. “A lot of Korean investors buy stocks with debt, which exaggerates the movements when we get a correction like this,” she added.
The sell-off was triggered by Nvidia, whose shares fell on Monday after the Wall Street Journal reported that it is in talks to provide around $250bn for OpenAI as part of a massive data-centre project. The BBC has contacted both companies for comment.
The decline allowed Apple to retake the crown as the world’s most valuable company after the iPhone maker rose about 25% this year. Cheng Chye Hsern, head of investments at wealth manager Providend, said Apple is one of the few tech firms “not taking part in the AI race”, making it appealing to investors worried about the billions rivals are spending on data centres.
Sydenham said AI spending among tech firms is “something that’s been testing investors’ nerves on and off in the last couple of months”. “Is it going to earn a proper return in the future? That’s what investors are worried about,” she said.
Jun Bei Liu, founder of Ten Cap, told the BBC there are also worries about increasing competition from China. Meanwhile, US-listed shares in SK Hynix fell 7.5% to well below the $149 offer price from its record-breaking Nasdaq debut on 9 July. Japan’s Nikkei 225, also dominated by tech, closed almost 4% lower.
The question now is whether the correction deepens or stabilises. For investors who rode the AI boom, the answer may determine whether the sell-off becomes a full-blown rout.