South Korean Tech Giants Plunge as AI Spending Concerns Clash with $100+ Oil Shock

South Korean Tech Giants Plunge as AI Spending Concerns Clash with $100+ Oil Shock​

The South Korean stock market faced significant selling pressure on Friday, with benchmark indices retreating more than 5%. The downturn was driven by deep-seated concerns over slowing AI spending from major U.S. technology firms and the sudden spike in oil prices above the $100 mark per barrel.

The KOSPI ended down 386.33 points, marking a decline of 5.44% to settle at 6,710.56 as of 0246 GMT. The sharp drop prompted a temporary sidecar trading curb on the market, halting programme trading for a period.

KOSPI Slumps Amid AI Chip Vulnerability​

Chipmakers and technology stocks bore the brunt of the negativity. Samsung Electronics saw its shares slide by 7.22%, while peer SK Hynix declined by 6.83%. These companies have been primary beneficiaries of the global AI boom, making them exceptionally susceptible to any deceleration in spending commitment from mega-tech firms.

The concerns echoed globally, as overnight reports showed stocks for Google’s parent company Alphabet sinking over 7%, while Microsoft and Amazon slipped up to 4%. Investors are reportedly worried that current payoffs might be lagging the pace of soaring AI expenditure across the industry.

Sector Weakness and Economic Headwinds​

Beyond the semiconductor sector, sentiment was weak across several heavyweights. Hyundai Motor and its sibling, Kia Corp, were significantly affected by market jitters, with shares dropping 9.09% and 8.28%, respectively.

The oil price increase back above $100 a barrel, fueled by escalating Middle East conflict concerns, added acute risk-off tension to the mood. This crude price jump stoked fears of a new inflation shock for consumers and corporations alike. On a positive note, Samsung BioLogics managed to rise substantially, closing up 9.79%.

Foreign Flows and Fixed Income Market Dynamics​

The market saw heavy trading activity across all issues. Of the 916 traded stocks, 271 advanced while 609 declined. Foreign investors were registered as net sellers of shares worth 1.63 trillion won (equivalent to $1.11 billion).

In currency movements, the Korean Won strengthened slightly, creeping higher to a near 11-week high of 1,463.1 per dollar on the onshore settlement platform. Meanwhile, in fixed income markets, September futures for three-year Treasury bonds registered a loss of 0.12 points at 102.57.

The yield curves also saw movement. The most liquid three-year Korean treasury bond yield rose by 5.8 basis points (bp) to 3.965%. Meanwhile, the benchmark 10-year yield increased by 5.9 bp, reaching 4.442%.