South Korea's KOSPI Crashes Over 10% As AI Chip Stocks Face Massive Selloff

South Korean shares plunged on Tuesday, with the benchmark KOSPI index crashing more than 10% as a global semiconductor selloff battered technology heavyweights and triggered a market-wide rout.

The KOSPI fell 724.37 points, or 10.73%, to 6,031.38, prompting a 20-minute trading halt after sharp losses spread across the market.

The selloff comes amid growing concerns over the sustainability of the artificial intelligence (AI) investment boom, intensifying competition from China and heavy selling in South Korea's largest technology companies.

AI Chip Selloff Deepens

A fresh wave of selling hit semiconductor stocks globally as investors questioned whether the massive spending on AI infrastructure can be sustained.

The losses also followed Nvidia's latest round of more than $750 billion in AI infrastructure deals, which fuelled concerns over the scale of AI-related capital expenditure.

"Greed has turned into fear for AI-related semiconductor stocks," Vey-Sern Ling, Managing Director at Union Bancaire Privee, told Bloomberg.

"Investors are now interpreting every piece of news negatively and using it as an excuse to sell, rather than critically analysing the true fundamental impact," he added.

China's Chip Advances Raise Fresh Concerns

Investor sentiment was further dented by reports suggesting Chinese semiconductor companies are making faster-than-expected technological progress.

According to Bloomberg, a Shanghai-based state-backed company has begun mass-producing immersion deep ultraviolet (DUV) lithography machines, raising concerns over the long-term dominance of Dutch chip-equipment maker ASML Holding.

The report triggered sharp declines across global chip-equipment manufacturers. ASM International fell as much as 7.3%, BE Semiconductor Industries declined 9.9%, Applied Materials dropped 6.7%, while Lam Research slipped 7.9%.

In Japan, Canon fell as much as 6.3%, Nikon dropped 9.2% and Lasertec tumbled up to 12%.

Investors also remained cautious following the blockbuster stock market debut of ChangXin Memory Technologies (CXMT) in China, which added to concerns about rising competition despite US export controls on advanced semiconductor technology.

Samsung, SK Hynix Lead Market Decline

Heavy selling in South Korea's technology giants amplified the decline in the broader market.

Samsung Electronics and SK Hynix, which together account for more than half of the KOSPI's weighting, both fell more than 10% during the session.

SK Hynix dropped about 10% after its American depositary receipts (ADRs) fell to a record low in New York and slipped below their initial US offering price. Samsung Electronics declined 9.15%.

The weakness spread across Asia, with Japan's Nikkei 225 and Taiwan's Taiex also falling more than 4% as investors exited many of this year's biggest AI winners.

The sharp decline in South Korean technology heavyweights magnified the impact of the global semiconductor selloff, making the KOSPI the worst-performing major equity index during the session.