South Korea’s Kospi Falls More Than 6 Percent as Chip Stocks Slide on AI and China Concerns

South Korea’s Kospi index fell more than 6 percent on Tuesday as semiconductor shares dropped sharply. By late morning the benchmark had declined 386 points, or about 6 percent, to just under 6,000. Samsung Electronics fell more than 7 percent and SK Hynix more than 8 percent.

Foreign investors sold a net 2.3 trillion won in shares. A sell-side sidecar, which temporarily suspends programme sell orders, was triggered for the first time in nearly two months after Kospi 200 futures dropped sharply. The index had already fallen 3.65 percent on Monday, closing at 6,384.24, its steepest one-day loss since early September.

The selling followed weakness in US semiconductor stocks overnight and fresh concerns about Chinese competition. ChangXin Memory Technologies said it plans to mass-produce next-generation DDR5 server memory on a 4F² architecture by year-end. Analysts said the prospect of expanded Chinese supply added to doubts about how long the current memory supercycle will last. High-bandwidth memory demand for artificial-intelligence systems has driven large gains in Samsung and SK Hynix shares this year. Those gains reversed as investors questioned valuations and the durability of AI-related spending.

US markets had closed mixed on Monday. The Nasdaq Composite fell 0.44 percent. Micron dropped nearly 4 percent and other chip names weakened. Investors are also awaiting US inflation data due Wednesday, which could influence Federal Reserve rate expectations before its October meeting.

Other Korean large-caps fell with the index. Hanwha Aerospace dropped more than 5 percent and Hyundai Motor nearly 6 percent. Institutions and individual investors were net buyers, but foreign selling outweighed them. The Korean won traded around 1,339 to the dollar.

The Kospi had climbed above 7,000 earlier in the year on the strength of chip earnings. Samsung reported record results in the most recent quarter, yet the stock still fell as the broader sector retreated. SK Hynix, a major supplier of high-bandwidth memory, has been particularly sensitive to shifts in AI demand expectations.

A sell-side sidecar had last been used about two months ago. Tuesday’s trigger reflected the speed of the decline rather than a full-day halt. Trading continued after the temporary suspension of programme sells. Market participants said the combination of Chinese supply fears, AI valuation concerns, and residual Middle East energy-price uncertainty contributed to the move.

Whether the drop marks a short-term correction or the start of a longer adjustment will depend on upcoming earnings from major chipmakers and on the path of US inflation and interest rates. For now the Kospi has given back a substantial portion of its recent gains in two consecutive sessions.