KOSPI Plunges Over 3% as Samsung and SK Hynix Tumble on AI Spending Fears, Erasing Rally in Seoul Sell-Off

South Korea's benchmark stock index fell more than 3% on Thursday, wiping out the previous day's rally as investors dumped shares of the country's two largest chipmakers amid growing doubts about whether the global boom in artificial intelligence spending can last.

The Korea Composite Stock Price Index, or KOSPI, closed down 201.89 points, or 3.52%, at 5,533.77. The tech-heavy KOSDAQ fared even worse, sliding 3.62% to 764.10.

The sell-off was led by Samsung Electronics and SK Hynix, which together account for a large share of the KOSPI's market value. SK Hynix fell 5.48%, while Samsung Electronics dropped 4.02%.

Rally reversed

Thursday's decline marked a sharp reversal from Wednesday, when the KOSPI surged about 3.3% to close at 5,735.66. Samsung gained 5.67% and SK Hynix rose 5.81% in that session, as investors bought back into chip stocks after a steep slide earlier in the month.

The rebound proved short-lived. The KOSPI opened lower on Thursday and fell below the 5,700 level within minutes of the opening bell. Early in the session, foreign investors were net buyers, partly offsetting selling by retail and institutional investors. But losses deepened through the afternoon as chip stocks extended their declines.

Market participants pointed to profit-taking after Wednesday's gains, combined with renewed concern about the outlook for semiconductor demand.

AI doubts weigh on chipmakers

The central worry for investors is whether massive spending by global technology companies on AI infrastructure will continue at its current pace and whether it will produce returns quickly enough to justify the investment.

That concern has weighed heavily on South Korea, whose stock market has become closely tied to the AI trade. SK Hynix is a leading supplier of high-bandwidth memory chips used in AI processors, and Samsung is among the world's largest memory chip producers.

Sentiment was dented overnight by results from U.S. chip equipment maker Lam Research. Although the company beat analysts' estimates for the latest quarter, its shares fell sharply in after-hours trading after it issued a forecast that disappointed investors.

The Philadelphia Semiconductor Index, a key gauge of U.S. chip stocks, recently posted its longest losing streak since October 2008, while the Nasdaq 100 suffered its steepest weekly drop since April 2025 last week.

Futures tied to the Nasdaq 100 also fell in Asian trading Thursday, signaling further pressure on technology shares.

Bank of Korea holds rates

The sell-off came as the Bank of Korea kept its benchmark interest rate unchanged at 3.00% after two consecutive rate increases. The decision, which was unanimous, was widely expected.

The central bank said volatility in stock prices had increased amid concerns about slowing profitability and investment in the semiconductor sector. Policymakers have been weighing inflationary pressures tied to the chip-driven economic upswing that has powered South Korea's growth this year.

Broad losses across the market

The decline extended well beyond chipmakers. Battery maker LG Energy Solution was among the laggards, and defense contractor LIG Nex1 fell sharply during the session.

Among the few bright spots was Samsung Electro-Mechanics, which rose after announcing it is joining Nvidia's substrate supply chain. Elice Group, a Korean cloud computing provider, jumped as much as 25% to trade above its initial public offering price for the first time since listing.

On the KOSDAQ, foreign and institutional investors were net sellers, while retail investors stepped in as net buyers, a pattern that has become common during recent bouts of market weakness.

Rising oil adds pressure

Global conditions added to the gloomy mood. Brent crude rose above $110 a barrel after deadly attacks in Saudi Arabia, while risks to shipping through the Strait of Hormuz persisted. Higher energy costs are a particular concern for South Korea, which imports nearly all of its oil.

Elevated oil prices have also reinforced expectations that the U.S. Federal Reserve may keep interest rates higher for longer, a scenario that typically weighs on growth stocks and on emerging market assets.

Volatile October

Thursday's drop adds to a turbulent month for Korean equities. The KOSPI has swung sharply in October as investors have alternated between optimism about the AI boom and worries that the rally had moved too far, too fast.

Despite the volatility, some brokerages remain bullish on the longer-term outlook. Hanwha Investment & Securities has projected the KOSPI could reach 7,600 by the end of the year and as high as 9,300 next year, citing strong earnings growth in the semiconductor sector.

Analysts at Kiwoom Securities said early in the day that the market could remain volatile, pointing to mixed signals from U.S. after-hours trading.

What's next

Investors will closely watch earnings from major U.S. technology companies in the coming days for signs of whether AI spending plans remain intact. Comments from large cloud providers about their capital spending for 2027 are likely to be particularly important for Korean chipmakers.

Samsung Electronics and SK Hynix are also scheduled to report detailed quarterly results later this month, which could provide fresh clues about memory chip demand and pricing.

For now, Thursday's sharp sell-off underscores how closely South Korea's stock market is tied to the fortunes of the global AI trade, and how quickly investor sentiment can shift.