South Korea's KOSPI Tumbles Over 4% as AI Tech Sell-Off Grips Asian Markets

Asian stock markets broadly declined on Monday, with South Korea’s KOSPI index plunging as investors resumed selling artificial intelligence-related technology shares. The sell-off outweighed positive sentiment from easing geopolitical tensions and a firm lead from Wall Street futures.

KOSPI Leads Losses as AI Stocks Tumble

South Korea’s KOSPI (KS11) was the region's biggest loser, slumping 4.2% in a sharp reversal from a record rally on Friday, according to data from Investing.com. The decline resumes a volatile trend that saw the index suffer its steepest monthly drop since 2008 in July amid concerns over AI valuations.

The pressure came from renewed selling in the market's heavyweight chipmakers:

• Samsung Electronics (KS:005930) shares dropped 7.2%.
• SK Hynix (KS:000660) shares fell 7.0%.

These two companies, which together account for more than half of the KOSPI’s market capitalization, fell despite recently reporting strong earnings, as investors reassessed lofty market expectations.

Mixed Performance Across the Region

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Other major markets in Asia also traded lower. In Japan, the Nikkei 225 fell 1.6% and the broader TOPIX lost over 2%, as investors continued to digest the Bank of Japan's signals of gradual policy normalization from last week.

Chinese markets were more resilient, with the CSI 300 and Shanghai Composite indexes down about 0.6%. Hong Kong’s Hang Seng index bucked the regional trend, rising 0.3% on gains from technology giants Alibaba and Tencent. Meanwhile, Australia’s S&P/ASX 200 outperformed its peers, closing up 0.5%.

Geopolitics and U.S. Cues Offer Limited Support

Positive news on the geopolitical front provided some underlying support for risk sentiment. Oil prices fell after the U.S. president announced negotiations with Iran over the Strait of Hormuz would begin, easing concerns over energy supply disruptions. The drop in crude prices, however, weighed on regional energy producers like Australia's Woodside Energy and Japan's INPEX Corp.

While U.S. stock futures gained in Asian trade following strong earnings from Microsoft and Alphabet last Friday, it was not enough to offset the bearish mood in Asian tech. Investors now await key economic data this week, including China's July trade figures, South Korea's inflation report, and the U.S. nonfarm payrolls report.