South Korea's chip-heavy stock market is plunging again as AI investors find more reasons to worry
South Korea’s stock market plunged on Tuesday as investors found a new reason to worry about the AI trade.
The benchmark Kospi index fell more than 7% intraday to its lowest level since July 31, extending a dramatic reversal for what was once the world’s hottest AI-fueled stock market.
AI chip heavyweights Samsung Electronics and SK Hynix led the losses, falling 9% and 10%, respectively, by midday.
The weakness spread across Asia, with Japan’s Nikkei and Taiwan’s chip-heavy Taiex both falling around 3%. The declines followed another weak session for US semiconductor stocks overnight, including Micron.
Investors were weighing a growing list of concerns about the AI trade, from rising Chinese competition to questions over how the industry’s massive infrastructure buildout will be financed.
“The latest catalyst has been further evidence of China’s growing ambitions across the AI ecosystem,” Chris Weston, the head of research at Pepperstone, wrote in a note Tuesday.
Weston pointed to Chinese memory-chip maker CXMT, which said it had made progress in developing technology that could pack more data onto memory chips and that it plans to introduce a new server-memory product by year-end.
CXMT has yet to demonstrate it can manufacture the technology at scale, and the announcement does not immediately challenge South Korea’s lead in high-bandwidth memory chips used in AI accelerators.
But it has added to investor concerns over how long memory makers can maintain their pricing power.
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The selloff marks another setback for the Kospi, which was the world’s best-performing major stock index in the first half of 2026 before tumbling in the second half as investors shifted toward other parts of the AI hardware supply chain, including Taiwan.
Adding to those concerns, Broadcom CEO Hock Tan warned Monday that capital, rather than chips or electricity, could become the biggest constraint on the AI industry’s growth.
Together, the developments suggest investors are looking beyond AI demand alone. They’re also scrutinizing pricing power and margins.
China’s ability to produce increasingly competitive technology at lower costs is “challenging established assumptions around market share, pricing power and the durability of margins,” Weston wrote.