South Korea's KOSPI Plunges Over 9% as Chip Stocks Tumble on AI Spending Fears

South Korea's benchmark KOSPI index plunged more than 9% on Tuesday, triggering a temporary trading halt, as a rout in heavyweight semiconductor stocks rattled investor confidence. The sell-off was fueled by mounting concerns over the future of artificial intelligence spending and intensifying competition within the chip industry.

Market Sell-Off Details

The KOSPI index dropped 9.2% to 6,134.77 points, its lowest level since mid-April, according to market data. The sharp decline triggered market circuit breakers, leading to a 20-minute suspension of trading after the index hit an 8% loss.

The downturn was led by the country's two largest chipmakers, which together account for over half of the KOSPI's market capitalization.

• SK Hynix Inc. (KS:000660) shares plummeted more than 11%.
• Samsung Electronics Co Ltd. (KS:005930) shares fell nearly 10%.

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Catalysts for the Decline

The sell-off in Seoul followed negative sentiment from the U.S. market, where shares of AI chip leader NVIDIA Corporation (NASDAQ:NVDA) fell nearly 5% overnight. The drop was reportedly linked to a Wall Street Journal report that NVIDIA may help finance a major data center project for OpenAI, sparking uncertainty among investors about the capital expenditure landscape for AI infrastructure.

Adding to the pressure, investors are growing increasingly concerned about rising competition from China. Recent reports of rapid advancements by Chinese firms, including the debut of memory chipmaker CXMT and progress in domestic lithography technology, have heightened fears of a more challenging market environment for South Korea's dominant semiconductor exporters.