Samsung Stock Plunges Nearly 10% as Kospi Triggers Circuit Breaker on China Chip Threat and Hot US Inflation

SEOUL, South Korea — Shares of Samsung Electronics plunged nearly 10% on Thursday, leading a dramatic sell-off that triggered circuit breakers across South Korea's stock markets as investors fled chip stocks amid fears of Chinese competition, rising U.S. interest rates and doubts about the artificial intelligence boom.

Samsung shares closed down 9.5%, after falling more than 10% during the session to as low as 204,500 won. Rival SK Hynix dropped 11.1%.

The benchmark Kospi index closed down 454.59 points, or 7.57%, at 5,554.22, its lowest close since April 7. The index had fallen as much as 9.29% to an intraday low of 5,450.81 before paring some losses.

Circuit breakers triggered

The steep decline forced the Korea Exchange to halt trading. A sell-side "sidecar," which temporarily suspends program selling tied to index futures, was activated at 9:07 a.m. A Level 1 circuit breaker followed at 12:38 p.m., halting all trading on the Kospi for 20 minutes.

A Level 1 circuit breaker is triggered when an index stays at least 8% below its previous close for one minute.

The tech-heavy Kosdaq triggered its own circuit breaker earlier, at 12:23 p.m., and also closed down more than 7%. It was the first time both markets activated circuit breakers on the same day since July 29.

It was the Kospi's 10th circuit breaker this year and the 16th in its history.

Why Samsung is falling

Several factors converged to drive the sell-off in Samsung and other chipmakers.

The first is growing concern about competition from China. Earlier this week, Chinese memory chipmaker ChangXin Memory Technologies said it had made progress on a new DRAM design that packs more memory into a smaller space and plans to ship server memory using the technology by the end of 2026.

The announcement raised fears that Chinese producers could eventually flood the market with cheaper memory chips and erode the high prices and profit margins that Samsung and SK Hynix have enjoyed during the AI boom. Samsung fell 7.4% and SK Hynix more than 10% on Tuesday after the news.

The second factor is rising interest rate fears. A report Wednesday showed U.S. consumer prices rose 3.7% in September from a year earlier, more than economists expected. The data increased expectations that the Federal Reserve could raise interest rates again, pushing Treasury yields higher and weighing on technology stocks worldwide.

The Nasdaq composite fell nearly 2% overnight, and the sell-off spread to Asian markets Thursday.

The third factor is mounting doubt about the AI investment boom. Investors have grown increasingly concerned about the pace of spending on AI infrastructure and the large amounts of debt being used to fund data centers.

U.S. AI cloud provider CoreWeave fell about 15% on Wall Street, renewing worries about the sustainability of the AI trade and hitting data center and chip stocks globally.

Foreign investors head for the exits

Foreign investors led the selling, offloading a net 3.62 trillion won ($2.68 billion) in shares on the Kospi.

Samsung and SK Hynix together account for more than half of the South Korean market's total value, meaning sharp moves in the two stocks have an outsized effect on the overall index.

Losses spread across technology and industrial shares. Samsung Electro-Mechanics plunged more than 15%, while Hyosung Heavy Industries fell 14.7%, Doosan dropped 13.5%, LS Electric fell 12.1% and chip equipment maker Hanmi Semiconductor lost 11.6%.

A sharp reversal

The sell-off marks a dramatic reversal for South Korean stocks, which surged earlier this year on booming demand for memory chips used in AI systems.

"Amid extreme volatility, including the triggering of circuit breakers, the KOSPI has fallen about 20% over the past six trading days," said Lee Kyung-min, a researcher at Daishin Securities.

The rout has hit retail investors especially hard, particularly those who bought leveraged exchange-traded funds tied to Samsung and SK Hynix, which magnify losses when shares fall.

Strong earnings not enough

The declines come despite strong recent results from Samsung. In July, the company reported a record operating profit of 89.4 trillion won, up nineteen-fold from a year earlier, driven by soaring demand and prices for memory chips.

Even then, its shares fell as much as 8.7% on the day of the report, a sign that investors had already priced in strong results and were growing nervous about how long the memory boom could last.

Won weakens

The South Korean won also weakened against the U.S. dollar as investors moved money out of the country's financial markets.

Investors will closely watch results from Taiwan Semiconductor Manufacturing, due Thursday, for signals about the strength of AI-related chip demand.

Further U.S. economic data, including producer prices, and the Federal Reserve's next interest rate decision, scheduled for next week, could also influence the direction of chip stocks.

Analysts will also be monitoring whether CXMT can deliver on its plans to ship its new memory chips by year's end, which will be key to assessing how serious a threat Chinese competition poses to Samsung's core business.

For now, the sell-off highlights how vulnerable South Korea's chip-dependent market has become to any sign of weakness in the AI trade.