The Kospi index in South Korea experienced a significant drop, plunging more than 11% on Tuesday. This decline was driven by a heavy sell-off of chipmaking stocks amid concerns that the boom period for artificial intelligence (AI) might be a bubble.
Shares of major companies like Samsung Electronics and SK Hynix were hit hard, with Samsung falling 13.1% and SK Hynix declining by 13.5%. The plunge led to a temporary halt in trading as the index dropped to its lowest since April, closing at 6,012.68. SK Hynix’s shares had also dipped below their initial Wall Street IPO price.
Analysts pointed to rising competition from Chinese AI startups and chipmakers as a key factor behind the sell-off. This was highlighted by the impressive 466% increase in the share price of Chinese memory chipmaker CXMT following its IPO in Shanghai, which raised $8.6 billion.
“We believe the market was likely spooked by the progress of China’s chipmaking equipment capabilities,” said Jing Jie Yu, an equity analyst at Morningstar. Despite the current market reaction, Yu stated that the dominance of global chipmaking leaders remains intact.
Other Asian markets witnessed declines as well. In Japan, the Nikkei 225 index fell by 4.3%, while Taiwan’s Taiex decreased by 4.7%. Hong Kong’s Hang Seng index remained stable, and the Shanghai Composite index experienced a 1.4% drop. Australia’s S&P/ASX 200 saw a slight increase of 0.4%.
Oil prices also saw a decrease, with Brent crude falling by 0.5% to $85.48 a barrel, influenced by developments in the U.S.-Iran situation. U.S. benchmark crude saw a 0.4% decline.
In the U.S., stock markets presented mixed results on Monday with the S&P 500 seeing a minor increase of less than 0.1%, the Dow Jones gaining 0.5%, and the Nasdaq experiencing a 0.2% drop. Major chipmaking stocks such as AMD, Nvidia, and Micron Technology all faced declines.
Currency markets saw little change with the U.S. dollar slightly down against the yen and the euro remaining stable.