Global Market: South Korean stocks tumble over 5% as AI spending concerns hit chipmakers

AI spending concerns trigger a sharp selloff in South Korean equities, with semiconductor stocks leading the decline.

The KOSPI fell 314.58 points, or 5.3%, to 5,623.08 as of 0217 GMT. During the session, the index triggered a sidecar trading curb, temporarily suspending algorithmic trading for five minutes amid heightened volatility.

The benchmark has lost around 18% so far in October, reversing gains recorded over the previous two months.

The selloff followed a sharp decline on Wall Street on Thursday, where investors reassessed heavy artificial intelligence spending by major technology companies while digesting corporate earnings and key inflation data. The weakness came a day after the US Federal Reserve kept interest rates unchanged.

Semiconductor heavyweights led the losses in Seoul, with Samsung Electronics falling 5.93% and SK Hynix declining 8.58%. The two companies came under pressure as investors reduced exposure to AI-linked stocks amid growing concerns over the scale of investments and the potential returns from the technology.

Among other major stocks, battery manufacturer LG Energy Solution edged up 0.35%, while Hyundai Motor and Kia Corp fell 3.59% and 3.51%, respectively. POSCO Holdings declined 1.45%, whereas Samsung Biologics advanced 4.10%.

Market breadth remained sharply negative, with 749 stocks declining against 138 advancing out of 908 traded issues. Foreign investors were net sellers of South Korean shares worth 844.9 billion won ($630.94 million), adding to the selling pressure, Reuters reported.

In the currency market, the South Korean won traded at 1,337.8 per dollar on the onshore settlement platform, gaining 0.13% from its previous close of 1,339.5.

In the bond market, December futures on three-year Korean Treasury bonds rose 0.09 points to 103.42. The benchmark three-year government bond yield declined 3.4 basis points to 3.734%, while the 10-year yield fell 7 basis points to 4.030%, Reuters reported.

The sharp decline in South Korean equities highlighted the vulnerability of markets heavily exposed to the semiconductor and AI investment cycle, as investors increasingly scrutinise whether the enormous spending on AI infrastructure will translate into sustainable earnings growth.