KOSPI Plunges 10.73% as Global Selloff Deepens Amid AI Valuation Fears and China Competition Surge

KOSPI Plunges 10.73% as Global Selloff Deepens Amid AI Valuation Fears and China Competition Surge​

The South Korean stock market faced severe turmoil on Tuesday as the benchmark KOSPI index crashed, driven by a global selloff in chipmakers. The technology-heavyweights of the Korean market bore the brunt of the rout, triggering a temporary trading halt before the index recovered some losses later in the session amidst value buying at lower levels.

Deepening Semiconductor Selloff Amid AI Valuation Concerns​

The massive downturn was significantly fueled by heightened concerns regarding the sustainability of the current artificial intelligence (AI) spending boom. A wave of selling intensified across the semiconductor sector as investors began questioning whether such high valuations could be maintained long term.

Vey-Sern Ling, managing director at Union Bancaire Privee, noted that "Greed has turned into fear for AI-related semiconductor stocks." He added that investors were reportedly interpreting every news piece negatively and using it as an excuse to sell, rather than critically analyzing the true fundamental impact.

Chinese Competition Intensifies Chip Stock Volatility​

Investor apprehension is increasingly directed toward intensifying competition originating from China. Concerns have mounted over whether rapid technological advancements by Chinese rivals can be countered by current market valuations.

The uncertainty was underscored when a report emerged stating that a Shanghai-based company had started mass-producing certain immersion deep ultraviolet (DUV) lithography tools. This development, which threatens the sales of major firms, triggered a broad selloff across chip equipment globally.

Global leaders in the field experienced significant drops following this news. ASM International NV fell as much as 7.3 percent, while BE Semiconductor Industries NV declined 9.9 percent. Applied Materials Inc. dropped 6.7 percent and Lam Research Corp. slipped 7.9 percent.

Lithography equipment makers in Japan also faced pressure. Nikon Corp., which manufactures immersion DUV systems, dropped 9.2 percent, marking one of its sharpest declines in over two months. Canon, another major player that produces mature equipment, fell as much as 6.3 percent. Investors remain highly sensitive to any challenge to ASML's dominance in the semiconductor supply chain despite ongoing US export controls.

Technology Heavyweights Suffer Massive Decline​

Heavy selling pressure directly impacted South Korea’s largest technology stocks, adding acute downward momentum to the benchmark index. Both memory chip makers experienced steep losses as investors liquidated positions from many of this year's biggest AI winners.

SK Hynix Inc., which dropped 10 percent after its American depositary receipts (ADRs) fell to a record low in New York, slipped below its initial US offering price. Samsung Electronics Co., another major KOSPI constituent, declined 9.15 percent.

The dual impact of these losses was significant. Samsung Electronics and SK Hynix together account for more than half of the KOSPI's weighting. This concentrated weight amplified the effect of the sector-wide selloff on the broader market index.