Kospi Index Falls Sharply Amidst Chipmaking Stock Turmoil

The Kospi index of South Korea experienced a dramatic decrease of over 11% on Tuesday. This decline resulted from significant selling of chipmaking stocks. Concerns have grown that the recent artificial intelligence surge might be a bubble.

This drop marked Kospi’s lowest point since April. Trading was temporarily halted due to the sharp decline in shares of Samsung Electronics and SK Hynix, companies heavily influencing the index. Samsung Electronics saw its shares fall by 13.1%, while SK Hynix dropped 13.5%.

Just a day prior, SK Hynix’s shares on the U.S. market closed at $143, below their $149 IPO price. Analysts indicate that increased competition from emerging Chinese AI startups and chipmakers is a key factor in the sell-off. Notably, CXMT, a Chinese memory chipmaker, saw a 466% increase in value during its trading debut. Their IPO in Shanghai raised a minimum of $8.6 billion.

On Tuesday, the sell-off was further influenced by a report from The Information, highlighting China’s advancements in mass production of deep ultraviolet chipmaking tools. Jing Jie Yu, an equity analyst at Morningstar, noted that while these advancements might have spooked the market, the reaction was excessive.

Other Asian markets also experienced downturns. Tokyo’s Nikkei 225 decreased by 4.3%, and Taiwan’s Taiex dropped 4.7%, with TSMC shares falling 3%. In contrast, Hong Kong’s Hang Seng remained mostly stable, and the Shanghai Composite index fell by 1.4%. In Australia, the S&P/ASX 200 rose by 0.4%, while India’s Sensex saw a slight 0.1% decline.

Oil prices also saw a reduction. Brent crude decreased by 0.5% settling at $85.48 per barrel. Likewise, U.S. benchmark crude went down by 0.4% to $82.25 a barrel. This reduction follows positive developments as the U.S. and Iran engaged in diplomatic efforts to resume negotiations.

In the U.S., market performance varied slightly. The S&P 500 increased less than 0.1%, the Dow Jones ended 0.5% higher, and the Nasdaq composite saw a slight decline of 0.2%. Several major chipmaking stocks weighed down these benchmarks, with AMD dropping 5.2%, Nvidia falling 5%, and Micron Technology decreasing by 2.3%.

In financial dealings, the U.S. dollar slightly decreased to 163.71 Japanese yen. Meanwhile, the euro remained the same at $1.1369.