A sweeping sell-off in semiconductor shares halted trading on South Korea’s benchmark Kospi index on Tuesday, as anxiety over artificial intelligence spending rippled from Wall Street through Asian markets. SK Hynix plunged more than 13%. Samsung Electronics fell over 12%. The declines triggered a 20-minute circuit breaker after the Kospi slid 8%, and the index dropped roughly 10% after trading resumed.
The rout extended a brutal stretch for chip stocks that began in New York on Monday, when Nvidia fell 5% and surrendered its position as the world’s most valuable listed company to Apple. The sell-off spread across Asia. Japan’s Nikkei 225 dropped almost 4.5%. Tokyo Electron fell nearly 11%, Advantest slid over 10%, and SoftBank Group declined 6.3%. Shares of Japanese memory manufacturer Kioxia plunged more than 18%.
Other Asian AI-linked names saw heavy selling. Samsung SDI dropped over 10%, LG Innotek slid nearly 18%, Seoul Semiconductor fell about 7%, and LG Chem lost more than 6%. Taiwan’s TSMC was down 2.9%. Mainland China’s tech-heavy ChiNext 300 index fell 4.7%, while the Hang Seng China Semiconductor Chips Index dropped 5%. In the United States, the VanEck Semiconductor ETF lost more than 2% on Monday, adding to Friday losses, with AMD falling 5%, Teradyne dropping 4%, and Micron Technology shedding about 2%.
AI jitters drive the decline
The sell-off deepened after the Wall Street Journal reported that Nvidia is in talks to provide around $250 billion for OpenAI as part of a massive data-centre project, raising fresh questions about whether AI investments can generate sufficient returns. As governments and companies spend hundreds of billions of dollars developing AI capabilities, some analysts have questioned whether the technology can become profitable enough to recoup such huge investments, according to the BBC.
Owen Lamont, senior vice president at Acadian Asset Management, told CNBC that investors face uncertainty about how AI will affect the economy. “Right now we’re facing an incredible uncertainty,” he said. “No one has any idea how this AI process is going to affect our economy, and so I think it’s going to be rocky no matter what.” Lamont added that leveraged exchange-traded products could be amplifying market swings across Korea, Hong Kong, and the United States, magnifying fluctuations even if they are not solely responsible for SK Hynix’s volatility.
Korean and U.S. markets grow intertwined
The sell-off illustrates how closely Asian technology shares and the U.S. AI trade have become linked. The 60-day correlation between the Kospi and Nasdaq 100 recently climbed to about 0.50, its highest level since 2021, according to data from Rayliant. Samsung Electronics and SK Hynix together account for more than half the Kospi index, and both sit at the center of the AI hardware supply chain, providing memory chips for data centres operated by U.S. technology giants.
Rolf Bulk, an analyst at Futurum Group, told CNBC that the correlation has increased because the Kospi has become a semiconductor index. Data-center demand rose from around 40% of global DRAM demand last year to more than half this year, and Bulk expects that share to increase further. That gives investors in Asia an early read on the strength of the global AI trade before Wall Street opens.
Jung In Yun, founder of Fibonacci Asset Management, said SK Hynix has become an important barometer because of its exposure to high-bandwidth memory, one of the most critical components in the AI supply chain. Samsung and SK Hynix provide the first liquid market reaction to overnight developments affecting global AI demand, he told CNBC. The dynamic was visible on July 13, when the Kospi fell more than 8%, dragged by SK Hynix’s 15% plunge, and the Nasdaq 100 followed to end 1.88% lower.
The closer relationship carries risks. Rising correlation erodes the diversification benefits investors traditionally sought by holding U.S. and Korean equities. Phillip Wool, head of research at Rayliant Global Advisors, said the fortunes of U.S. and Korean tech stocks are increasingly driven by a common factor: sentiment toward the AI hardware trade. Korea no longer provides diversification against U.S. tech, Bulk said, and a slowdown in hyperscaler capital expenditure would hit the Korean market harder than most others.
The Kospi has been halted eight times this year under the circuit breaker mechanism, which is designed to calm panic selling. The index more than doubled from the start of the year to mid-June but has since lost around a third of its value. Trading has been particularly volatile as large numbers of retail investors have poured into South Korean markets. On Monday, U.S.-listed shares in SK Hynix fell by 7.5% to well below the $149 offer price from their record-breaking Nasdaq debut on 9 July.
Sundeep Gantori, chief investment officer for equities at Standard Chartered, said the sell-off reflects a broader deterioration in sentiment after media reports highlighted China’s ambitions in memory chips and lithography equipment. He said the long-term outlook remains intact, with the AI investment cycle continuing to support leading technology companies. Broker reports suggesting memory prices will peak in 2027 also contributed to the weakness in Korean stocks, Gantori added, though he said risk-reward has improved at current valuations.