Kospi slides over 7% as investors dump chip stocks on concerns of excess AI capacity

Shares dipped nearly 8 percent Thursday, dragged down by a sharp sell-off in semiconductor shares as investor sentiment soured amid renewed concerns over excess capacity.

The Kospi plunged 655.32 points, or 7.89 percent, to close at 7,648.09. after falling as low as 7,616.33. Due to the sharp drop, the bourse operator, the Korea Exchange (KRX), activated a sell-side sidecar for the Kospi around 9:07 a.m., halting program trading for five minutes.

A sell-side sidecar is triggered when the Kospi 200 Futures index decreases by 5 percent or more for at least one minute.

Investor sentiment toward semiconductor stocks weakened after media reports said U.S. tech giant Meta Platforms was considering selling access to its AI computing infrastructure, fueling concerns that the company may have built more AI computing capacity than it currently needs.

Samsung Electronics and SK hynix also came under selling pressure after reports that Apple is in talks to source chips from two Chinese semiconductor companies, raising concerns about intensifying competition for Korean chipmakers.

U.S. stocks retreated overnight. The S&P 500 slipped 0.2 percent, while the tech-heavy Nasdaq 100 fell 1.5 percent. The Philadelphia Semiconductor Index, a key gauge of chip stocks, tumbled 6.3 percent. U.S. Federal Reserve Chair Kevin Warsh said inflation expectations and inflation risks have eased in recent weeks, bolstering hopes for a delay in an interest rate hike.

Trade volume was moderate at 499.85 million shares worth 48.86 trillion won ($31.44 billion), with decliners outnumbering winners 614 to 279. Foreigners and institutions sold a net 4.37 trillion won and 2.07 trillion won, respectively, while individuals bought a net 6.26 trillion won.

"Semiconductor stocks came under pressure after reports that Meta could enter the cloud infrastructure business," said Lee Kyoung-min, an analyst at Daishin Securities. "Reports that Apple is exploring chip sourcing from Chinese semiconductor companies also raised concerns that increased supply could ease supply bottlenecks and weaken chip pricing."

Tech heavyweights drove down the market. Samsung Electronics shed 9.06 percent to 286,000 won and SK hynix tumbled 14.57 percent to 2.19 million won. AI investment firm SK Square sank 13.2 percent to 1.52 million won, and chip components maker Samsung Electro-Mechanics retreated 12.65 percent to 1.93 million won.

Power equipment shares also lost ground as expectations for a further expansion of AI infrastructure investment weakened. LS Electric lost 10.25 percent to 236,500 won, while HD Hyundai Electric fell 4.25 percent to 969,000 won.

The won fell 0.9 won from the previous session to trade at 1,555.8 won against the dollar at 3:30 p.m. 

Yonhap