KOSPI Plunges 4.3% Below 5,600 as Samsung and SK Hynix Sell-Off Deepens on AI Spending Fears and Yields

SEOUL, South Korea — South Korean stocks tumbled more than 4% on Tuesday, erasing the previous day's rebound as investors dumped semiconductor shares amid growing doubts about the payoff from massive spending on artificial intelligence and rising U.S. bond yields.

The benchmark Korea Composite Stock Price Index, or KOSPI, was down 247.83 points, or 4.30%, at 5,520.18 as of 1:51 p.m. local time. The index fell as much as 4.8% during the session, according to Bloomberg, making it the worst performer among major Asia-Pacific markets.

The slide wiped out Monday's gains, when the KOSPI staged a dramatic turnaround to close up 1.76% at 5,768.01 after opening more than 3% lower.

Chipmakers lead the decline

Semiconductor giants Samsung Electronics and SK Hynix, which together account for a large share of the KOSPI's value, led the sell-off.

SK Hynix plunged more than 7% at one point, falling to near its lowest level since April, while Samsung Electronics dropped more than 3%. Other heavyweights, including SK Square, Hyundai Motor, LG Energy Solution and Samsung SDI, also traded lower, and nearly every sector was in the red.

The renewed weakness extended a punishing stretch for the two chipmakers. Samsung and SK Hynix suffered their worst weekly losses since the 2008 global financial crisis last week, falling 17.8% and 24.3%, respectively, between Oct. 12 and Oct. 16.

Both stocks have fallen sharply from their peaks earlier this year. As of Monday's close, Samsung was down nearly 40% from its June record of 362,500 won, while SK Hynix had lost more than half its value since its June high of about 2.92 million won.

AI investment fears

The sell-off reflects growing investor concern about whether the enormous sums being poured into artificial intelligence infrastructure will generate sufficient returns.

South Korea's market is widely viewed as a barometer of the AI investment cycle because of the dominant role Samsung and SK Hynix play in supplying memory chips, including high-bandwidth memory used in AI data centers.

Even record profits have failed to reassure investors. Samsung earlier this month reported preliminary third-quarter operating profit of 107.4 trillion won, a record, but the stock fell as investors focused on whether memory price gains and margins can be sustained.

Doubts about the profitability of AI capital spending have weighed on technology shares across Asia, with markets failing to follow a tech-led rebound on Wall Street overnight.

Rising U.S. yields add pressure

Higher U.S. borrowing costs also weighed on sentiment. The yield on the 10-year U.S. Treasury note rose about 7 basis points to near 5.14%, according to Bloomberg, dampening appetite for riskier assets such as stocks in emerging markets.

Higher yields tend to reduce the appeal of growth-oriented technology stocks, whose valuations depend heavily on expected future profits.

Investors are also navigating uncertainty ahead of the Nov. 3 U.S. midterm elections and over the outlook for interest rates.

Foreign investors sell

Foreign investors were heavy sellers, offloading about $480 million worth of KOSPI shares in the first two hours of trading, according to Bloomberg. Institutional investors also sold, adding to the downward pressure.

Foreign investor flows are closely watched in South Korea because of their outsized influence on the market's direction, particularly in large-cap stocks like Samsung and SK Hynix.

Weak IPO debut

Adding to the gloom, shares of Elice, which made its trading debut Tuesday, plunged as much as 32% during the session, a sign of fading risk appetite among investors.

A painful month

Tuesday's drop extends a steep October slide for the KOSPI, which had fallen more than 15% this month before Monday's rebound.

The losses have hit retail investors especially hard. Younger Koreans had piled into Samsung and SK Hynix during the AI boom, and many are now sitting on significant losses. About 35% of investors in their 20s and 39% of those in their 30s held one or both stocks, according to an analysis by Korea Investment & Securities cited by local media. As of last week, 74% of SK Hynix investors and 53% of Samsung investors at the brokerage were sitting on losses.

Local media have reported that some young investors are delaying home purchases and wedding plans after the market rout wiped out savings.

Volatile swings

The market's sharp swings underscore the volatility gripping Korean equities. Monday's session saw the KOSPI drop below 5,500 in early trading before bargain hunters drove a strong afternoon recovery.

Tuesday's decline suggests that confidence remains fragile, with investors quick to sell at signs of renewed pressure.

What to watch

Investors will be closely watching Samsung's full third-quarter earnings report on Oct. 29, which is expected to provide more detail on memory chip prices, high-bandwidth memory sales and the outlook for 2027.

Movements in U.S. Treasury yields, foreign investor flows and global technology stocks will also be key drivers for the KOSPI in the days ahead.

The Korean market closes at 3:30 p.m. local time.