South Korea’s main index, the KOSPI, tumbled to its lowest point in two decades on Tuesday, after a massive drop in semiconductor stock prices triggered one of its biggest declines in a year. The index briefly dipped below the 6,000-level before the Korea Exchange (KRX) invoked a Level 1 circuit breaker at 10:13 a.m. local time, halting trading for 20 minutes.
Before trading was halted, the KOSPI had fallen 542.24 points, or 8.02%, to 6,213.51. The benchmark at its intraday low was around 11% lower, highlighting the size of the investor selling. The KRX entered into its circuit breaker for the eighth time this year on Tuesday.
Samsung and SK Hynix Drive Market Losses
South Korea’s two biggest chip makers led the sell-off, making up almost half of the KOSPI’s capitalization.
Samsung Electronics tumbled as much as 13.4%, and SK Hynix as much as 14% to add to market pressures.
The weakness followed another difficult session for semiconductor stocks globally. The American depositary receipts (ADRs) began trading on the Nasdaq earlier this month and closed 7.5% down on trading on the night to $143.02, the first time they have closed below the initial public offering price of $149.
The market plunge has wiped out about 396 trillion won (around $264 billion) worth of market value in total.
What Triggered the KOSPI Selloff?
Several factors combined to drive Tuesday’s sharp decline. Investors’ mood soured Monday when reports surfaced that a Shanghai-based, state-backed firm had started mass-producing deep ultraviolet (DUV) lithography machines in the home market.
The report warned of increased competition in the semiconductor industry, which could drive down shares of Dutch chip equipment manufacturer ASML and could lead to a wider selloff of technology stocks around the world.
The weakness spread across the large-cap semiconductor group in the U.S. over the course of the night. Asian chipmakers were hit by falling shares as Nvidia dipped nearly 5%, AMD dropped over 8%, and Micron Technology lost almost 6% in the markets’ first hours.
Adding to the current investor fears were Chinese companies working on home DUV lithography equipment, according to Han Ji-young, an analyst at Kiwoom Securities, as quoted by Bloomberg.
Market participants were also reassessing high valuations across AI-related stocks and growing corporate debt linked to massive artificial intelligence infrastructure spending.
In recent announcements, it was revealed that over $750 billion is being promised in investments for AI-related products and services, sparking fears that the demand expectations have gotten out of hand.
“The recent selloff in semiconductor stocks appears to be driven more by a sharp deterioration in market sentiment than by any immediate change in fundamentals,” Jung In Yun, chief executive officer at Fibonacci Asset Management Global, said, according to Bloomberg.
Regional Markets Also Came Under Pressure
The drop extended to Asian stock markets. Japan’s Nikkei 225 fell to 62,385, leaving the index about 14.6% below its 2026 peak. Semiconductor stocks also saw big losses, with Kioxia Holdings down 18 percent, and Tokyo Electron and Advantest down more than 10 percent and 10.35 percent, respectively.
The valuation of SoftBank Group, the shareholder of Arm, is closely correlated with AI, and its stock index fell 5.16%.
Oil prices also weakened as investors reduced exposure to risk assets across the region.
“We seem to be at the despair part of the selloff, where tech investors are rushing for the exit because the Nasdaq says so,” Matt Simpson, senior analyst at StoneX, said, according to Bloomberg. “But right now the KOSPI is setting the tone for sentiment in Asia, and it looks ugly.”
What Investors Will Watch Next
Attention now shifts to a busy earnings calendar that could shape sentiment toward the semiconductor sector and broader AI investment outlook.
Samsung Electronics will follow with quarterly earnings on July 30, and SK Hynix on July 29. They will also be closely watching the results this week from Microsoft, Meta Platforms, Apple and Amazon for signs of capital expenditure plans that could affect long-term demand for AI chips.
The results follow South Korea’s announcement of a government-led industrial plan that pledged Samsung, SK Hynix and other domestic firms to spend at least $880 billion on semiconductor production and data center facilities.
If those companies reaffirm strong AI-related spending plans, investors will be looking for evidence that current semiconductor demand remains supported despite Tuesday’s sharp market correction.