KOSPI drops 11% on AI chip spending worries, sector selloff

A sharp selloff in global semiconductor stocks, triggered by concerns over the sustainability of artificial intelligence infrastructure spending, has sent shockwaves through financial markets, with South Korea's Kospi index suffering a dramatic single-day decline of roughly 11 percent. The plunge, which occurred on July 28, was driven by steep losses in the country's two largest chipmakers, Samsung Electronics and SK Hynix, and forced the Korea Exchange to implement two separate trading halts.

The downturn reflects growing investor anxiety that major technology companies may scale back capital expenditures on AI hardware, a primary driver of the recent memory chip boom. This sentiment was compounded by tempered guidance from chipmaker Broadcom earlier in July, casting doubt on the previously unshakable AI investment narrative. The selloff was not confined to Asia; U.S. semiconductor benchmarks, including the Philadelphia Semiconductor Index and the VanEck Semiconductor ETF, also posted significant losses in premarket and early trading.

Analysts note that the extreme volatility in South Korea has been amplified by the concentrated nature of its market and the proliferation of...