South Korea’s Kospi Index Drops Over 11% Due to Chipmaker Sell-Off

The Kospi index in South Korea fell more than 11% on Tuesday. This decline was spurred by heavy selling of chipmaking stocks. There are fears that the recent boom in artificial intelligence technology might be a bubble. Other markets in Asia also declined, and U.S. futures moved slightly lower. Oil prices were down as well.

Trading was briefly halted as the Kospi reached its lowest point since April. This was largely due to significant drops in shares of major chipmakers Samsung Electronics and SK Hynix. Samsung’s shares fell 13.1%, while SK Hynix declined by 13.5%. Earlier this month, SK Hynix’s shares in the U.S. fell below their $149 IPO price to close at $143 per share.

Analysts attribute the selling of AI-related stocks to rising competition from Chinese AI startups and chipmakers. These developments pose a threat to prominent global companies that have seen their shares rise sharply in recent months. For example, Chinese memory chipmaker CXMT saw a 466% increase in its stock price during its debut, raising at least $8.6 billion in its Shanghai IPO.

Tuesday’s sell-off was also influenced by a report indicating that China has started mass production of deep ultraviolet chipmaking tools. Analyst Jing Jie Yu from Morningstar noted that these advancements likely concerned investors about potential threats to global chipmakers. Yet, Yu feels the sell-off might be an overreaction, asserting that global chip leaders should still maintain their dominant positions.

Other Asian markets faced declines too. Tokyo’s Nikkei 225 index fell 4.3% to 62,127.57. Taiwan’s Taiex decreased by 4.7% with TSMC shares, a leading chipmaker, dropping 3%. Hong Kong’s Hang Seng held steady at 25,196.42, and the Shanghai Composite index lost 1.4% to reach 3,805.06. In contrast, the S&P/ASX 200 of Australia gained 0.4% to 8,932.90, and India’s Sensex dipped 0.1%.

Oil prices continued to drop following progress in talks between the U.S. and Iran. Mediators have been successful in bringing both countries back to negotiations. Brent crude, the global oil standard, fell 0.5%, settling at $85.48 a barrel. Previously, it was around $72 a barrel prior to the Iran conflict beginning in late February. U.S. crude dropped 0.4% to $82.25 a barrel.

In U.S. stock markets, the S&P 500 saw a slight gain of less than 0.1% on Monday. The Dow Jones Industrial Average rose by 0.5%, but the Nasdaq Composite dipped by 0.2%. Chip stocks like AMD and Nvidia declined, causing the benchmarks to decrease. AMD fell 5.2%, Nvidia dropped 5%, and Micron Technology saw a decline of 2.3%.

On the currency front, early Tuesday saw the U.S. dollar fall to 163.71 Japanese yen from 163.75 yen. Meanwhile, the euro held steady at $1.1369.

Kurtenbach reported from Bangkok.