South Korea’s main stock index moved toward bear-market territory on Wednesday after a broad selloff in chipmakers and other AI-linked names, with the benchmark hitting a near three-week low during the session.
The KOSPI fell as much as 5.4%, touching 7,222.60 points. That level represents a decline in excess of 20% from the indexs June 19 record high of 9,385.59 points and, if the market had closed at the intraday low, would have signaled a technical bear market - defined as a drop of 20% or more from a recent peak.
The downturn occurred even after Samsung Electronics Co Ltd posted a record-high second-quarter profit. While the earnings print confirmed strong near-term profitability for the memory-chip giant, its revenue missed some high expectations, a result that prompted investors to revisit whether Samsung and peer firms can sustain the brisk, AI-driven growth that helped power recent gains.
In the session, Samsung fell as much as 6%. Investors appeared to use the report and the lingering uncertainty over forward revenue to lock in gains after the stock more than doubled in value over the past year.
Samsungs peer, SK Hynix Inc, saw steep losses as well, sliding as much as 5% after a roughly 6% decline in the previous session. Market participants said heightened leverage in the chip sector intensified moves lower, particularly following the introduction of several leveraged and inverse exchange-traded funds since May.
Compounding the selloff in memory names was a report that Apple Inc was considering increased use of Chinese suppliers amid a growing supply shortage among South Korean producers. Market commentary said such a shift could exert downward pressure on memory prices over the medium term, raising further questions about profit sustainability in memory-centric firms.
Pressure was not limited to chipmakers. Hyundai Motor also weighed on the benchmark, dropping 4.7% during the session. The automaker had rallied about 120% over the past 12 months amid investor enthusiasm for its partnerships tied to Nvidia and broader physical-AI ambitions; nonetheless, the stock participated in the broader risk-off move.
The KOSPI had been the strongest-performing major global index this year, propelled by optimism around AI and associated gains in local technology and semiconductor shares. That outperformance has softened in recent weeks amid rising volatility and creeping doubts about whether the elevated valuations tied to AI growth trajectories will hold in the near term.
Market context and investor behavior
Investors treated recent gains in marquee chipmakers as opportunities to take profits, particularly where returns had been concentrated and valuations stretched. Leverage through leveraged and inverse ETFs, introduced since May, appears to have amplified downside moves in the sector. At the same time, questions around demand trajectory and potential supply shifts have added to risk perceptions.
What to watch next
- Whether the KOSPI closes at or below the intraday lows, confirming a technical bear market.
- Further earnings and revenue guidance from memory-chip producers and comments around AI-driven demand sustainability.
- Any confirmation of supply-chain shifts affecting memory pricing and manufacturer market share.