South Korea's Kospi Enters Bear Market as Chip Selloff Deepens Amid AI Concerns

Mumbai, July 8: South Korea’s benchmark Kospi index tumbled into bear market territory on Wednesday after extending losses for a third straight session, as a sharp selloff in heavyweight chipmakers and mounting concerns over the sustainability of the artificial intelligence (AI) boom as well as fears arising over risky investment products shook sentiment.

The Kospi fell over 5%, taking its decline to over 20% from its record closing high in May, the conventional threshold for a bear market. The latest slide follows heavy losses earlier this week, making South Korea one of the first major equity markets to officially enter a bear phase after months of AI-led gains.

Chipmakers lead market lower

Technology stocks remained at the centre of the selloff, with Samsung Electronics and SK Hynix witnessing sharp swings during the session.

Samsung initially rose after forecasting a 19-fold jump in second-quarter operating profit, driven by robust demand for AI memory chips. However, the gains quickly evaporated, with the stock falling as much as 7.6%, as investors judged the earnings guidance to be below lofty market expectations. At close, Samsung Electronics was down 6.3%.

SK Hynix declined 5.7%, extending losses from the previous session.

The weakness mirrored an overnight decline in US semiconductor stocks, where companies including Intel, Micron Technology and AMD came under heavy selling pressure amid fears that the AI-driven rally may have run ahead of fundamentals.

Investors question AI valuations

The recent correction reflects growing concerns that the explosive rally in AI-related stocks may be losing momentum after delivering outsized gains over the past year.

Analysts said investors are increasingly focused on whether earnings growth can keep pace with elevated valuations, particularly as memory-chip pricing is expected to moderate in the second half of the year. Rising component costs and signs of more cautious spending by customers have also fuelled worries over demand.

Brokerages have begun reassessing their outlook on the sector. One has cut its target price on Samsung Electronics, and the other highlighted memory-chip pricing as a key factor to watch in the coming quarters.

Foreign investors turn sellers

Foreign investors continued to offload South Korean equities, adding to pressure on the broader market.
The latest bout of volatility underscores how quickly sentiment can reverse when expectations become stretched.

Market participants will now closely monitor upcoming earnings from global semiconductor companies and developments in AI spending trends for clues on whether the sector can regain its footing after the sharp correction.

Source: Korea Exchange Index site