Section: Economy
Format: Special Report
Author: Sinisa Brkic (sb)
KOSPI Plunges as Samsung, SK Hynix and AI Chip Stocks Sell Off. South Korea’s KOSPI fell more than 10 percent as Samsung Electronics and SK Hynix plunged. China’s CXMT listing and reported progress in chipmaking equipment are intensifying pressure on the global AI trade.
South Korea has become the center of a rapidly expanding global semiconductor selloff. The KOSPI fell by more than 10 percent at one stage on Tuesday as investors dumped Samsung Electronics, SK Hynix and other technology stocks, forcing the exchange to activate automatic restrictions on program trading. The immediate shock came from Seoul, but the underlying concerns are global. Investors are reassessing the profitability of the artificial intelligence investment boom just as China demonstrates greater financial and technological ambition in memory chips and semiconductor manufacturing equipment.
Seoul becomes the center of the semiconductor rout
The KOSPI dropped more than 10 percent by midday in Seoul, reaching 6,051.19 at one reported stage and falling to its lowest level since April. An earlier market reading showed the index down 7.41 percent at 6,253.81, illustrating the speed and severity of the intraday moves rather than a contradiction between reported figures.
The Korea Exchange activated sell-side “sidecar” measures for both the KOSPI and the smaller Kosdaq market. These safeguards temporarily suspend program trading orders when market movements become exceptionally sharp, reducing the immediate impact of automated selling without necessarily closing the entire market.
The distinction matters because early reports used varying descriptions, including trading curbs and temporary trading halts. The confirmed intervention at that stage involved automatic restrictions on program orders, a mechanism intended to slow mechanical selling and allow prices to stabilize.
Samsung and SK Hynix turn concentration into contagion
Samsung Electronics and SK Hynix were at the center of the decline. Samsung fell as much as 13.4 percent during the session, while SK Hynix lost as much as 14 percent, although individual price reports varied according to the time of measurement.
The effect on the broader market was unusually severe because the two memory chip manufacturers account for roughly half of the KOSPI’s weighting. When both companies fall by double digits, the index does not merely reflect a weak technology sector. It becomes a concentrated transmission mechanism for the selloff.
SK Hynix is particularly exposed to shifts in confidence surrounding artificial intelligence. The company is a major supplier of high-bandwidth memory used in advanced AI systems, and its share price had become closely associated with expectations of sustained spending on accelerators, servers and data centers.
Its newly listed US depositary shares closed 7.5 percent lower on Monday at $143.02, falling below their $149 offering price for the first time. That reversal added pressure in Seoul and demonstrated how quickly sentiment had changed toward one of the most prominent beneficiaries of the AI infrastructure boom.
The market is questioning the economics of artificial intelligence
The selloff does not prove that demand for artificial intelligence has collapsed. Semiconductor manufacturers, cloud providers and data center operators continue to report substantial demand for computing power, memory and infrastructure.
What has changed is the standard investors are applying to that demand. Markets are increasingly asking whether hundreds of billions of dollars in capital spending will produce returns quickly enough to justify elevated valuations across the AI supply chain.
That concern becomes more serious when chip companies, infrastructure providers and AI developers appear financially dependent on one another. Reports that major technology suppliers could support or guarantee financing for enormous data center projects have intensified questions about whether parts of the industry are helping finance the demand from which they expect to profit.
The distinction is central to the current correction. Investors are not rejecting the technical significance of artificial intelligence. They are challenging the assumption that every layer of the investment cycle will deliver exceptional margins at the same time.
CXMT’s spectacular debut changes the competitive calculation
China’s ChangXin Memory Technologies, known as CXMT, entered public markets on Monday with one of the most dramatic stock market debuts in recent history. Its shares closed at 49 yuan after being issued at 8.66 yuan, a first-day increase of 466 percent.
The company raised 57.92 billion yuan, or approximately $8.6 billion, in the largest mainland Chinese semiconductor offering on record. The surge lifted its market capitalization to about 3.3 trillion yuan, equivalent to roughly $488 billion at the exchange rate cited during the listing.
That valuation should be treated cautiously. Only 6.73 percent of the enlarged share capital was freely tradable at the time of the listing, meaning a relatively small public float could magnify price movements and produce an exceptional valuation without requiring investors to purchase most of the company’s shares.
The strategic implications are more substantial than the first-day share price. CXMT now has billions of dollars in additional capital to finance production, research and capacity expansion as China attempts to reduce its reliance on foreign memory suppliers.
For Samsung, SK Hynix and US-based Micron, the immediate threat is not that CXMT already matches every advanced product they manufacture. The larger risk is that a well-funded Chinese competitor could expand conventional memory production, pressure prices and gradually improve its position in more advanced segments.
China’s reported DUV progress is significant, but unproven
The second Chinese development weighing on semiconductor markets concerns lithography equipment. A report published on Monday said a state-backed Chinese manufacturer had begun limited production of domestically developed immersion deep ultraviolet systems.
These machines are expected to be supplied to Chinese chipmakers including SMIC, Hua Hong Semiconductor and CXMT. Initial production was reported at approximately five systems in 2026, with around 20 units projected for 2027.
The report is strategically important because immersion DUV equipment is among the most sophisticated chipmaking technology still available to Chinese manufacturers after export restrictions blocked their access to the most advanced extreme ultraviolet systems. A domestic alternative could reduce reliance on imported machinery and make future restrictions less effective.
It would nevertheless be inaccurate to conclude that China has already caught up with ASML. The reported Chinese machines still require further testing, and questions remain about their reliability, production yields, performance and readiness for large-scale commercial use. The identity of the manufacturer was not publicly disclosed, and ASML declined to comment.
ASML also retains its unique position in extreme ultraviolet lithography, which is required for many of the most advanced logic and memory manufacturing processes. China’s reported DUV progress therefore represents a potential challenge to ASML’s position in parts of the Chinese market, not proof that its broader technological advantage has disappeared.
Europe was already feeling the pressure
The report about Chinese lithography equipment caused immediate losses across Europe’s semiconductor supply chain on Monday. ASML shares fell more than 7 percent, while BE Semiconductor Industries dropped about 8.5 percent, Soitec lost approximately 5 percent and Infineon Technologies declined nearly 3 percent.
Those declines show why the events in Seoul cannot be treated as an isolated Korean market disturbance. The semiconductor industry operates through a tightly connected network of equipment manufacturers, foundries, memory producers, design companies and cloud customers.
A technological development in China can therefore affect a Dutch equipment manufacturer, a South Korean memory producer and a US chip designer within the same trading cycle. The connection is financial as much as industrial because many of these companies had been valued through the same assumption of sustained and exceptionally profitable AI demand.
The selloff spreads across Asia
Japan’s Nikkei 225 fell about 4 percent, while Taiwan’s Taiex lost approximately 3.9 percent. Japanese memory manufacturer Kioxia declined nearly 18 percent, and Taiwanese chip designer MediaTek fell by more than 9 percent during the morning session.
The regional losses reveal a common vulnerability. South Korea, Japan and Taiwan contain many of the companies that manufacture the memory, processing, packaging and production equipment required for advanced computing.
These markets benefited disproportionately when investors treated AI infrastructure spending as a durable growth cycle. They are now being punished disproportionately as markets reassess how long that spending can continue and which companies will retain pricing power.
The pressure had already reached the United States before Asian trading began. Nvidia lost nearly 5 percent during Monday’s session, while the Philadelphia Semiconductor Index fell as investors reduced exposure to chipmakers. US equity futures remained comparatively stable during the early Asian selloff, suggesting that the broader American market had not yet matched the scale of the declines in Seoul.
A heavily leveraged market meets a violent reversal
South Korea’s market structure has amplified the speed of the decline. Samsung and SK Hynix dominate the main index, while leveraged exchange-traded products and derivatives allow investors to make large directional bets on individual companies and the market as a whole.
This concentration can reinforce gains during a rally, but it can also create forced or mechanical selling when prices reverse. Leveraged products must frequently rebalance as markets move, potentially increasing demand to sell during falling sessions and intensifying volatility.
The current collapse also follows an extraordinary rise. The KOSPI had reached a record closing level of 9,114.55 on June 22 and remained sharply higher for the year even after several severe corrections. That earlier advance made the market particularly vulnerable to profit-taking, margin pressure and rapid changes in investor positioning.
The activation of automatic trading controls reflects that vulnerability. It does not reveal the final direction of the market, but it confirms that ordinary liquidity conditions were struggling to absorb the scale of the orders.
Is this a correction or a structural break?
At present, the evidence supports the description of a severe repricing rather than the definitive end of the artificial intelligence boom. Demand for advanced memory, computing systems and data center capacity remains substantial, and several leading semiconductor companies continue to report strong operating performance.
The market’s concern is that strong demand may no longer be enough. Investors also want evidence that capital spending can generate sustainable cash flow, that customers can finance their expansion without excessive support and that new competitors will not destroy pricing power.
The distinction between cyclical and structural pressure will become clearer through production data, contract pricing and corporate earnings. If demand remains strong while valuations stabilize, the current decline may prove to be a violent correction in an overheated sector.
A more serious scenario would emerge if customers begin delaying data center projects, memory prices weaken as capacity expands, or Chinese manufacturers gain market share faster than expected. Under those conditions, the selloff would represent more than a valuation adjustment and could become a broader earnings reset for the semiconductor industry.
What markets will watch next
Investors will focus first on whether the KOSPI can stabilize after the automatic restrictions expire and whether foreign institutions continue selling Korean technology shares. The behavior of Samsung and SK Hynix will remain decisive because their index weight gives them extraordinary influence over the direction of the entire market.
Attention will then shift to major US technology earnings and capital spending guidance. Markets will examine whether leading cloud and platform companies are increasing infrastructure budgets, moderating expansion or demanding better commercial terms from semiconductor suppliers.
The next set of questions concerns China. Investors will seek evidence of how quickly CXMT can expand production, whether its technology is gaining acceptance among major customers and whether the reported Chinese lithography machines can operate reliably outside controlled testing environments.
Any policy response from Seoul will also be important. At the time of reporting, no comprehensive market stabilization package had been confirmed, and it remained unclear whether authorities would introduce additional restrictions on leveraged products or other measures aimed at containing volatility.
A global stress test for the AI trade
The KOSPI collapse is not simply the story of a weak trading session in South Korea. It is a concentrated test of three assumptions that had supported the global technology rally: that AI infrastructure spending would remain extraordinarily profitable, that established chipmakers would retain their competitive position and that China’s technological progress would remain slow enough to protect existing market leaders.
All three assumptions are now under greater pressure. None has been conclusively disproved, but markets no longer appear willing to accept them without stronger evidence.
That is why the selloff matters far beyond Seoul. South Korea has become the first and most violent expression of a wider reconsideration taking place across the semiconductor industry.
The AI boom is not confirmed to be over. The period in which investors rewarded almost every company connected to it with limited scrutiny may be.
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