South Korea’s Kospi Index Plunges 10.8% as Tech Stocks Sell Off

Global financial markets experienced a severe jolt as a broad-based sell-off in artificial intelligence and semiconductor stocks intensified. South Korea bore the brunt of the downturn, with its benchmark index suffering its steepest single-session drop in months and triggering trading halts.

South Korea’s Kospi Plunges 10.8% Amid Tech Sell-Off

South Korea’s Kospi index dropped 10.84% to close at 6,023.66, marking its lowest level since mid-April, according to Associated Press reporting. The sharp decline was fueled by heavy selling of major technology heavyweights, with SK Hynix and Samsung Electronics each declining more than 13%. Shares in chipmaker Samsung Electronics sank 13.4% while those of SK Hynix tumbled 14.7%. On Monday, SK Hynix’s U.S.-traded shares fell to below the $149 initial public offering, or IPO, price for its Wall Street debut earlier this month, closing at $143 a share.

The losses in Asia followed a rough session for U.S. technology stocks and coincided with heightened volatility. Volatility on the benchmark Kospi Index has topped 60%, almost double that of Japan’s Nikkei 225. It’s even put the notoriously skittish cryptocurrency Bitcoin in the shade. The gyrations have forced the Korea Exchange to trigger its circuit breaker mechanism, which puts a temporary halt on trading to prevent flash crashes and avoid investor panic, seven times this year through mid-July. There was no such halt in 2025 and just one in 2024. Japan’s Nikkei fell 4%.

The negative sentiment quickly spilled over into digital asset markets. Bitcoin BTC$63,566.12 has come under pressure since the U.S. stock market closed Monday, with South Korea’s Kospi leading Asian equities lower and providing risk-off cues to the cryptocurrency market. BTC has fallen to $63,200 from nearly $65,000, a 2.7% decline that has spilled over into the broader crypto market and dragged down the likes of ether (ETH), XRP (XRP), solana (SOL), and others. The drop ends the brief resilience the market showed earlier Monday as shares in NVDA tanked on Wall Street.

South Korea’s Kospi Plunges 10.8% as Chipmaking Stocks Trigger Asian Rout

The Senate has shelved the CLARITY Act to prioritize a Russia sanctions bill, making a vote on the much-awaited legislation, touted to deliver regulatory clarity and unlock massive institutional buying for digital assets, unlikely before next week. This leaves only the final days before the Aug. 8 recess. Asian stocks cracked sharply, with South Korea’s Kospi index falling 10% to its lowest level since mid-April. The index has now dropped 25% from its mid-June peak. The latest decline featured steep losses in heavyweights such as Samsung and SK Hynix. The market is falling out of love with chipmakers at the moment and that's been a big driver of the bull market in South Korea, InvestingLive wrote.

China’s Chipmaking Progress and Competitive Pressures

Market analysts pointed to a mix of competitive pressures and valuation anxiety driving the tech retreat. Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans. Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by the Information that China has begun mass production of homegrown deep ultraviolet (DUV) chip-making tools.

South Korea’s KOSPI Index Plunges Over 8 Percent Triggering Circuit Breaker

“We believe the market was likely spooked by the progress of China’s chip-making equipment capabilities, and was worried that this progress would threaten the competitive position of global chip making and chip equipment leaders,” said Jing Jie Yu, an equity analyst at Morningstar, adding that the sell-off was “largely a kneejerk reaction and overdone”.

Jing Jie Yu, equity analyst at Morningstar

On Monday, shares in the Chinese memory chip maker CXMT rose by 466% when it floated on the Shanghai stock exchange, underlining China’s drive to create its own AI supply. CXMT raised at least. A big factor driving the selling of AI-related shares, analysts said, is the expectation that rising competition from Chinese AI startups and chipmakers might undermine gains for leading global companies whose shares have skyrocketed in the past months due to the AI frenzy. Traders also are selling to lock in recent profits from the prolonged rally in such shares. A 466% jump in the price of Chinese memory chipmaker CXMT in its trading debut Monday has underscored such concerns.

Federal Reserve Rate Decision and Commodity Markets Awaited

As investors digested the tech sector correction, attention shifted firmly toward broader market events, including a Federal Reserve rate decision. Futures tied to the S&P 500 dropped in early trading on Tuesday, with investors bracing for a big week of mega-cap earnings and a Federal Reserve rate decision. S&P 500 futures dipped 0.1% and Nasdaq 100 futures fell 0.73%. Dow futures rose by 86 points, or 0.16%.

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Wall Street is coming off a choppy trading session. The 30-stock Dow advanced more than 260 points, or roughly 0.5%, and the S&P 500 eked out a slight gain, helped by a pullback in oil prices following a pause in fighting in the Middle East. The Nasdaq Composite ended the day down 0.2%, as an unwind in semiconductor stocks weighed on the tech-heavy index, which spilled over into Asian markets overnight with South Korea’s Kospi temporarily halted after slumping 10.84%.

The tension in the market reflects uncertainty ahead of a big week for stocks with earnings results from Amazon, Meta Platforms and Microsoft in the calendar. The chip trade hinges on continued spending from the hyperscalers — even as the mega-caps themselves falter. Apple also reports this week. Meanwhile, in oil markets, prices continued to fall, with Brent crude futures at about $84 a barrel while Iran and Oman use a lull in fighting to try and hammer out an agreement to reopen the Strait of Hormuz.