Korean Stocks Plunge After Chipmaker Selloff Erases Gains, Fueling Concerns Over Global AI Demand
The benchmark KOSPI index experienced a sharp reversal, sliding as much as 8.2% on Friday amid renewed selling pressure across major chipmakers. This significant drop wiped out previous session gains and prompted the Korea Exchange to suspend trading for twenty minutes, marking the second time this type of halt had been issued this week.Samsung Electronics Co. and SK Hynix Inc. both saw their shares fall by more than 9%. The sell-off was heavily driven by foreign investors who liquidated 2.7 trillion won ($1.7 billion) worth of KOSPI shares during the morning trading session.
Chip Stocks Suffer Massive Losses as AI Outlook Shifts
The plunge reflects a rapid shift from Thursday, when market optimism had been buoyed by Micron Technology Inc.’s bullish forecast and anticipated US listing plans for SK Hynix. However, sentiment quickly soured after investors parsed several critical developments concerning the ongoing artificial intelligence boom.Concerns arose after Apple Inc. reportedly implemented a product price hike due to memory chip shortages. Additionally, worries emerged that OpenAI might postpone its initial public offering until next year.
Market analysts noted these factors raise questions regarding demand elasticity and the durability of memory chip margins. Fabien Yip of IG International stated that the inability of Apple, one of the world’s largest component buyers, to absorb the cost surge brings this scrutiny into focus.
Market Volatility Amplified by Retail Frenzy and ETF Flows
The KOSPI has been highly volatile throughout the year, with its movement closely linked to the two giant chipmakers that constitute nearly 60% of the gauge’s weighting. These extreme swings have led some observers to compare the market activity to a meme-stock frenzy.Leveraged exchange-traded funds (ETFs) focused on these leading stocks, which are highly popular among retail traders, have been amplifying the day-to-day volatility through their daily rebalancing mechanism.
Analysts Weigh In: Demand Elasticity and Broader Headwinds Loom
While some acknowledge that the memory trade still holds significant potential, other strategists warn of broader headwinds facing the wider AI movement. Charu Chanana, chief investment strategist at Saxo Markets, noted that the risk is that a strong memory cycle currently might lead to a slowdown in the broader AI market later on. The market appears to be actively pricing this specific kind of systemic risk.Separately, amid ongoing volatility, Samsung and SK Hynix are preparing to announce hundreds of billions of dollars worth of new investments starting Monday, according to reports from South Korean media outlets.
Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
The information provided is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Readers are advised to rely on their own assessment and judgment and consult appropriate financial advisers, if required, before taking any investment-related decisions.
Any views, opinions, or statements expressed, where applicable, are those of the respective analysts or experts and do not reflect the views of this website. The website has no association with such viewpoints and does not assume any responsibility for them.