South Korea Kospi Drops 6% as SK Hynix Earnings Miss Forecasts

South Korea’s Kospi Drops Amid AI Sell-Off and SK Hynix Earnings Miss

The Kospi fell more than 8% earlier in the day before closing 6% lower at 5,663.24, according to Apnews reports. The benchmark index had only recently topped the 9,000 threshold before tumbling to its lowest level since early April. SK Hynix shares sank 9.4%, while fellow South Korean chipmaker Samsung Electronics dropped 4.8%.

The downturn extended into a second consecutive day of severe losses for the South Korean market. According to The Guardian, Seoul’s semiconductor-dominated index slid by as much as 12.6% at one point on Wednesday, following a nearly 11% slump the previous day. At its worst, the market faced a drop of more than 40% from a peak reached a little over a month prior.

Investor Anxiety and Wider Tech Sector Pressure

The sharp correction in South Korea mirrored a broader wave of skepticism regarding massive capital expenditures in artificial intelligence. Markets have been stricken by repeated spates of selling of AI-related stocks as investors react to various developments, including technological progress in China toward cheaper and advanced AI models.

Although SK Hynix reported record profits for the second quarter as a producer of chips essential for the expansion of AI datacentres, the figures still undershot investor expectations, driving its shares down by as much as 16% during intraday trading.

SK Hynix delivered strong results, but in today’s AI market strong is no longer enough, said Gary Tan, a portfolio manager at Allspring Global Investments in Singapore, as cited by The Guardian. Investors were looking for additional catalysts, particularly around long-term agreements and shareholder returns, to support a memory sector that has become the epicentre of the AI trade.

Analysts noted that retail and small-time investors had led the charge in buying chipmakers’ stocks using borrowed money. While this leverage fueled previous rallies, it exacerbated the subsequent sell-off as participants rushed to pull their money out and book losses amid panic selling.

Government Response and Broader Asian Market Impact

As the market turmoil deepened, South Korea’s finance minister, Koo Yun-cheol, informed the national assembly that the government was actively reviewing market stabilisation measures.

The weakness in semiconductor stocks rippled across other Asian exchanges:

• Japan: Tokyo’s Nikkei 225 lost 1.5% to 61,434.19. Equipment maker Tokyo Electron sank 10.6%, and Lasertec Corp. fell 8.3%.
• Taiwan: The Taiex shed 3.8%, while contract chipmaker TSMC saw its shares fall 3% in Taipei.
• China and Hong Kong: The Shanghai Composite recovered early losses to close up 0.4% at 3,830.02, while the Hang Seng gained 2% to reach 25,807.92.

Market observers emphasized that the heavy concentration of market capitalization in companies like SK Hynix and Samsung Electronics—which together account for more than half of the Kospi’s total market capitalization—has left the broader South Korean exchange uniquely vulnerable to shifts in investor sentiment surrounding the semiconductor and artificial intelligence sectors.