Media365
South Korea’s stock market endured a highly volatile session on Tuesday, with the Kospi index plunging before staging a sharp rebound as a global sell-off in technology and artificial intelligence (AI) stocks rattled markets across Asia.
At one point, the Kospi fell by nearly 10 per cent, forcing trading to be halted twice — a rare move that underscored the intensity of investor panic. The index later recovered much of its losses as bargain hunters stepped in, but the day left fresh doubts over how long the AI-driven rally can continue.
The sharp decline followed a weak session on Wall Street, where investors dumped technology shares amid fears that US interest rates may stay elevated for longer than expected. The selling quickly spread across Asia, hitting markets with heavy exposure to chipmakers especially hard.
South Korea, home to some of the world’s biggest memory chip companies, found itself at the centre of the turmoil.
Samsung and SK Hynix caught in the crossfire
Shares of South Korea’s biggest tech companies swung wildly throughout the day.
Samsung Electronics, the country’s largest listed company, fell more than 3 per cent at one point before recovering strongly. SK Hynix also dropped sharply before trimming its losses.
The two chipmakers account for a large share of the Kospi index and have been among the biggest beneficiaries of the global AI boom. Their share prices have risen and fallen with investor expectations around demand for chips used in AI systems and data centres.
But growing concerns that tech companies may be spending too aggressively on AI have prompted investors to question whether current valuations are sustainable.
AI excitement meets higher interest rates
The latest market swings reflect a broader shift in investor sentiment.
For much of the past year, AI-related stocks pushed global markets higher as investors poured money into chipmakers and technology firms expected to benefit from the AI trend.
That optimism is now colliding with concerns about interest rates.
The US Federal Reserve recently signalled that rates may remain high for longer, prompting investors to scale back hopes for quick cuts. Higher borrowing costs can make it more expensive for technology companies to finance the massive spending required for AI projects.
Some analysts say investors are now asking whether the next phase of AI growth can continue without companies taking on significantly more debt.
Those worries helped trigger a sharp fall in US chip stocks, which then spread to markets around the world.
Leveraged bets make the swings worse
South Korea’s market was made even more unstable by the growing popularity of leveraged exchange-traded funds, or ETFs, linked to individual stocks.
In recent months, many retail investors — often called South Korea’s “ants” because of their large numbers — have rushed into these products tied to popular stocks such as Samsung Electronics and SK Hynix.
These funds can magnify gains when markets rise, but they can also deepen losses when prices fall.
Regulators have already raised concerns about these products. Earlier this week, South Korea’s Financial Supervisory Service said some leveraged ETFs may have been launched too quickly, adding to worries about risky speculation in the market.
When tech shares fell, these leveraged bets added more selling pressure and helped intensify the day’s wild swings.
Regional markets feel the heat
The sell-off was not limited to South Korea.
In Taiwan, shares of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s biggest contract chipmaker, fell sharply as investors pulled back from AI-related stocks. The wider Taiwanese market also ended lower.
US stock futures pointed to continued caution among investors, while bond markets showed growing uncertainty about the future path of interest rates.
There was, however, some relief from the geopolitical front. Signs of progress in talks involving Iran helped push oil prices lower, easing fears of major disruptions to energy supplies through the Strait of Hormuz.
Correction or warning sign?
Even with the sharp fall, many analysts believe this is more of a correction than the end of the AI story.
After months of strong gains, tech stocks had become vulnerable to profit-taking and changes in interest-rate expectations.
Still, the events in Seoul showed how quickly markets can turn when investors begin to question the assumptions behind high stock prices.
For now, South Korea’s dramatic trading day stands as one of the clearest signs that the AI trade is entering a tougher phase — one where earnings, borrowing costs and investor confidence may matter just as much as new technology.
