Seoul's benchmark Kospi index experienced a sharp decline of 7.4% today, closing at 5,914.35, marking its lowest level since late July. This dramatic fall follows a period of robust growth earlier in the year, where the index had surged past 9,000 in June, reaching an all-time high largely propelled by the global artificial intelligence (AI) boom.
The selloff was primarily driven by investor apprehension regarding the long-term sustainability of the AI-fueled market rally and intensifying competition within the memory chip sector. Reports indicating technological advancements by China’s CXMT have heightened concerns for industry leaders such as Samsung Electronics, SK Hynix, and Micron Technology.
Shares of major South Korean chipmakers were hit hard, with Samsung Electronics plummeting 8.18% and memory chip giant SK Hynix dropping 8.8% during the trading session.
Indian IT Sector Bucks the Trend
In stark contrast to the downturn in Asian chip stocks, the Indian IT sector witnessed a significant boost in investor sentiment. Leading Indian IT services companies, including Tata Consultancy Services (TCS), HCL Technologies, Tech Mahindra, and Infosys, emerged as top gainers on both the Sensex and Nifty indices, with their shares zooming up to 6%.
The BSE IT index led the market in early deals, climbing 829 points to reach 29,047, while the Nifty IT index also added 935 points, closing at 29,282. This divergence highlights a shift in market focus, with some investors rotating out of high-flying AI-dependent sectors.
Global Market Reactions
The Kospi's sharp decline resonated across other Asian markets. Japan's Nikkei 225 fell 2.5%, with chip equipment maker Tokyo Electron losing 6.6%. Hong Kong's Hang Seng index dropped 1%, and the Shanghai Composite index slipped 1.1%. Taiwan's Taiex also saw a 1.9% decrease, with its leading chipmaker TSMC down 1.6%.
On Wall Street, US stocks ended mixed, but chip-related shares were notable losers. Nvidia was down 1.3%, Advanced Micro Devices (AMD) fell 2.3%, Micron Technology lost 3.9%, and Broadcom declined 1.9%, reflecting the global concerns impacting the semiconductor industry.