South Korea’s KOSPI Crashes 44%—$2 Trillion Wiped Out in 40-Day AI Chip Selloff
South Korea’s main stock index has plunged nearly 44% in just 40 days, erasing about $2 trillion in market value as a brutal selloff in artificial intelligence and semiconductor stocks shakes the country’s export-driven economy [207274]. The KOSPI suffered its worst single-day drop in years, falling 11% in one session, as investors panicked over rising competition from Chinese chipmakers and fears that the AI boom is overinflated [206335][206120].
The crash has hit South Korea’s biggest companies hardest. Samsung Electronics, the country’s top chipmaker, fell 13.39% in a single day, while rival SK Hynix plunged 14.65% [206120]. The losses spread beyond tech, dragging down automakers like Hyundai Motor, which fell 9.68%, and Kia, which dropped 6.6% [206120]. The selloff was so severe that the Korea Exchange activated a “sidecar” mechanism—a circuit breaker that halts programmed selling for five minutes—after the KOSPI 200 futures index dropped more than 5% in one minute [206120].
The root of the crisis lies in South Korea’s heavy reliance on semiconductors, which account for nearly 20% of the country’s total exports [207734]. When global chip demand weakens or competition intensifies, the entire market suffers. Investors are now worried that Chinese chipmakers are catching up to South Korean rivals, threatening the profits of companies like Samsung and SK Hynix [206335]. At the same time, a global rout in AI-related stocks has exposed concerns about overvaluation and slowing demand for AI chips [207274][206120].
Even record profits have failed to reassure markets. Samsung posted a record operating profit of 89.5 trillion won (US$62 billion) for the second quarter—a jump of 1,814% from a year earlier—and revenue climbed 130% to 171.5 trillion won [207746]. Yet its shares still fell [207746]. The same pattern hit SK Hynix, which also reported record earnings [207746]. The “dirty secret,” analysts say, is that the boom may not last: memory chip prices are expected to drop soon, and oversupply could follow [207746].
The selloff is not isolated to South Korea. Japan’s Nikkei index fell nearly 4%, with memory maker Kioxia plunging 18.33% and chip equipment makers Advantest and Tokyo Electron dropping 10.11% and 10.96%, respectively [206120]. China’s Shanghai Composite fell 1.16%, and the Shenzhen index lost 4.52% [206120]. Across Asia, markets swung between losses and gains as bargain hunters tried to buy the dip, while geopolitical tensions in the Middle East added to the cautious mood [207657].
Investors are now watching whether this is a short-term panic or the start of a longer downturn. The answer depends on whether South Korea can diversify its economy beyond chips—and whether the global AI rally can survive the reality check [207734]. For now, the path forward remains uncertain [207734].