South Korea's benchmark KOSPI stock index fell more than 5% on Wednesday, dropping more than 20% from a record close in late June and signaling that the market is in bear territory. The index closed 409.52 points, or 5.35%, lower at 7,246.79, its lowest close since May 20, as chipmaker stocks swung wildly on AI worries and fears over risky investment products rattled investors.
The damage landed where it usually does. On the trading floor, not in the boardrooms. Samsung Electronics fell 6.3% and SK Hynix lost 5.7%, after U.S. semiconductor stocks slumped overnight and the Philadelphia Semiconductor Index dropped 4.7% as investors questioned whether AI-related spending could keep going. The market opened lower, clawed back as much as 1.8%, then sank as much as 6.1%, triggering a "sidecar" trading curb that temporarily halted algorithmic trading.
Who Pays When the Market Panics
The KOSPI is now down more than 20% from its record close of 9,114.55 on June 22, a threshold commonly considered to confirm a bearish market. That slide came after a day of whiplash trading that showed how quickly speculative money can turn on itself. Samsung Electronics and SK Hynix both opened with losses, tracked an overnight decline in U.S. chip stocks, then briefly rebounded before falling again. Samsung slid as much as 7.6% and SK Hynix dropped as much as 5.2% in afternoon trading.
Han Ji-young, an analyst at Kiwoom Securities, said, "There seems to be spill-over effects from a slump in the previous session, which came despite Samsung Electronics' strong earnings, while there are worries about a slowdown in memory price growth and uncertainty over an earnings 'peak-out.'"
That language says plenty. Strong earnings weren't enough. The market wanted more. The bosses of capital always do.
What the Authorities Say They'll Watch
South Korean Finance Minister Koo Yun-cheol pledged to closely monitor risk factors that could heighten stock market volatility, citing worries about recently introduced single-stock leveraged exchange-traded funds linked to chipmaker stocks. On Tuesday, the KOSPI closed 4.9% lower after triggering a circuit breaker for the sixth time this year and the 12th in history. The apparatus keeps adding more levers, more products, more ways to gamble, then acts surprised when the machine shakes apart.
Deputy Finance Minister Moon Ji-sung said, "Supply-demand dynamics of the dollar-won market are expected to shift in the second half," adding that pressure from foreign investors taking profits and rebalancing should ease going forward. Moon pointed to won demand from an upcoming U.S. share sale by SK Hynix, which is set to be one of the world's largest new share sales.
On Wednesday, dollar-selling related to the U.S. share sale by SK Hynix emerged in the country's dollar-won forwards market, Reuters reported. Foreigners were net buyers of shares worth 335.9 billion won ($223.86 million) after 13 straight sessions of selloff. The won strengthened past the 1,500 mark and traded 1.2% higher at 1,498.5 per dollar on the onshore settlement platform, hitting its strongest level since May 29.
Chip Giants, Small People, and the Same Old Gamble
In a separate report, shares of South Korean chipmakers Samsung Electronics and SK Hynix reversed early gains to fall sharply on Wednesday amid lingering concerns over slowing memory price growth and whether earnings have peaked. Samsung slid as much as 7.6% and SK Hynix dropped as much as 5.2% in afternoon trading, after earlier rebounding as much as 1.4% and 5.8%, respectively. Both stocks had opened the day with losses, tracking an overnight decline in U.S. chip stocks.
The reversal suggested bargain hunting seen earlier in the session faded as investors remained cautious following Samsung's sharp post-earnings decline a day earlier. Positive sentiment around SK Hynix's planned U.S. listing failed to provide any lift. The market's faith in endless growth keeps colliding with the same hard wall: prices, profits, and the limits of hype.
Analysts said the earnings season is only just beginning and expectations for strong results from chipmakers remain intact. However, they added that while memory chip supply is expected to remain tight through the third quarter, investors are increasingly focused on signs that the pace of memory price increases could slow in the second half of this year, clouding the outlook for further earnings growth.
Park Yuak, an analyst at Kiwoom Securities, cut his target price for Samsung by about 9% to 390,000 won ($257.15), saying rising prices for components such as CPUs and package substrates were pushing up PC and smartphone prices, making customers more cautious about additional memory purchases. Samsung shares last traded at 281,000 won.
JPMorgan said in a note that memory prices would remain the key driver of earnings in the second half, as supply continued to lag demand despite growing customer resistance to higher costs. The bank added that NAND conventional chip pricing could outperform investor expectations, supported by strong demand from U.S. hyperscalers.
The Korean session began after a broad overnight selloff in U.S. semiconductor shares, with Intel, Micron and AMD falling 9.7%, 4.7% and 6.5%, respectively. The Philadelphia semiconductor index lost 4.7%. The selling was triggered by Samsung's second-quarter preliminary earnings on Tuesday, after the chipmaker's estimate of a 19-fold jump in quarterly operating profit failed to satisfy investors' lofty expectations despite robust demand for AI memory chips. Samsung's shares tumbled 6.9% on the day, fuelling a broader retreat from AI-related investments that later spread to Wall Street.
The numbers keep moving. The people at the bottom keep absorbing the shock.