KOSPI crashes 11%: Why South Korea's stock market is witnessing a massive selloff

At the time of writing, the benchmark KOSPI index had plunged 743.63 points, or 11.01%, to 6,012.12.South Korea's stock market saw a dramatic selloff on Tuesday as investors rushed to exit technology and semiconductor stocks. The sharp decline came amid growing concerns that the global artificial intelligence (AI) investment boom may be losing momentum and that competition in the chip industry is heating up.At the time of writing, the benchmark KOSPI index had plunged 743.63 points, or 11.01%, to 6,012.12.Here's what triggered the steep decline.GLOBAL CHIP STOCKS CAME UNDER HEAVY SELLINGThe biggest reason behind the market slump was a sharp selloff in semiconductor stocks across the world. For the past two years, chipmakers have been among the biggest winners as companies poured billions into artificial intelligence (AI). However, investors are now beginning to question whether this pace of spending can continue.The latest concerns emerged even after Nvidia announced more than $750 billion worth of AI infrastructure deals. Instead of boosting confidence, the announcement fuelled worries that AI-related investments may have become too large and difficult to sustain over the long term. As a result, investors chose to book profits in many of the world's biggest chip companies.TECH GIANTS DRAGGED THE MARKET LOWERThe biggest impact on the KOSPI came from heavy selling in Samsung Electronics and SK Hynix, two of South Korea's largest companies and among the world's leading memory chip manufacturers.Samsung Electronics fell more than 9%, while SK Hynix dropped by over 10% as investors exited technology stocks.The decline in these two companies had a much bigger impact because together they account for more than half of the KOSPI's total weighting. When stocks of this size fall sharply, the entire index tends to come under pressure.CHINA'S GROWING CHIP AMBITIONS ADD TO WORRIESMarket sentiment was also shaken by reports that a Chinese state-backed company has started mass-producing certain chipmaking machines.According to a Bloomberg report, the Shanghai-based company has begun manufacturing immersion deep ultraviolet (DUV) lithography tools, a technology that has long been dominated by Dutch company ASML.The development raised concerns that China is making faster progress in semiconductor manufacturing despite US export restrictions. Investors fear that if Chinese companies continue to improve their technology, it could increase competition for established global players.The news triggered selling across the chip equipment industry. Shares of ASML fell sharply, while several other global semiconductor equipment makers, including ASM International, BE Semiconductor Industries, Applied Materials and Lam Research, also declined. Japanese companies Nikon and Canon, which manufacture chipmaking equipment, were also among the major losers.AI enthusiasm is facing its biggest testThe recent rally in global technology stocks has been driven largely by expectations that artificial intelligence will continue to generate massive demand for advanced chips.However, investors are becoming more cautious. Questions are now being raised about whether companies can continue spending at the same pace on AI infrastructure while still delivering strong returns.At the same time, China's rapid progress in semiconductor technology is creating fresh uncertainty about future competition in the industry.These concerns have prompted investors to reduce their exposure to technology stocks, particularly those that have seen strong gains over the past year.The impact spread across Asian marketsThe weakness was not limited to South Korea. Japan's Nikkei 225 and Taiwan's Taiex also declined by more than 4% as investors sold many of the region's biggest semiconductor companies.The broad-based decline highlights how closely Asian markets are linked to the global chip industry. When sentiment towards semiconductor stocks weakens, markets with a large technology presence tend to feel the impact first.For now, investors will be closely watching whether confidence returns to the AI trade or whether concerns over valuations, rising competition and slowing investment continue to weigh on technology stocks in the days ahead.- EndsPublished By: Jasmine anandPublished On: Jul 28, 2026 12:12 IST