South Korea KOSPI plunges 8% as AI‑related chip stocks tumble

South Korea’s benchmark KOSPI slumped as much as 8 % on Thursday, the steepest drop since June 23, after semiconductor giants Samsung Electronics and SK Hynix tumbled 9.1 % and 14.6 % respectively amid renewed worries over AI‑related overcapacity and pricing pressures [1].

AI‑linked chip sell‑off drives the plunge

The sell‑off was sparked by media reports that Meta Platforms plans to sell access to its AI computing power, raising fears that the company may have over‑built capacity and could curb demand for external chip suppliers. A second report suggested Apple might source memory chips from Chinese manufacturers, further threatening South Korean chipmakers’ market share. These headlines coincided with a broader reassessment of AI‑driven valuations, which had propelled semiconductor stocks to record highs earlier in the year. The rapid price declines in Samsung and SK Hynix, which together account for more than half of the KOSPI’s market value, forced the exchange to activate a 20‑minute circuit‑breaker under its rules for an 8 % index fall – the third such pause this week and the fifth in 2026 [3].

Regional ripple effects and market context

The Korean sell‑off spilled over to neighboring markets. Taiwan’s index slipped 0.6 % after TSMC fell 1.6 % on the same day, while Japan’s Nikkei 225 closed more than 4 % lower, led by a 12.5 % drop in SoftBank shares, another AI‑linked player [3]. Hong Kong was the lone outlier, gaining over 1 % as Chinese chip firms rallied. Commodity markets were buoyed by easing tensions in the Strait of Hormuz, and U.S. policy cues – including comments from Fed officials pointing to a steadier inflation outlook – helped temper broader risk aversion. Nonetheless, investors now await U.S. non‑farm payrolls and upcoming earnings from TSMC (scheduled for July 16) for further direction [1].

What to watch

• U.S. non‑farm payrolls (July 2) – a key gauge of U.S. labor market strength that could reshape expectations for Fed rate moves.
• TSMC earnings (July 16) – the first major AI‑related results of the season, likely to test the durability of semiconductor valuations.
• Apple’s component sourcing – any confirmation of Chinese memory‑chip procurement could intensify pressure on Samsung and SK Hynix.

The sharp KOSPI decline underscores how quickly AI‑driven hype can reverse, especially when chip makers face both pricing headwinds and the prospect of overcapacity. Whether the market views this as a temporary correction or the start of a broader re‑pricing of AI infrastructure remains to be seen.