Kospi slides into bear market as AI chip stocks unravel
South Korea's kospi has entered a bear market after tumbling about 25% from its late-June record high of 9,114.55, a sharp reversal that still leaves it the world's best-performing major equity index this year. Chip giants Samsung Electronics and SK Hynix — more than half the index — are driving the slide amid deepening AI fatigue and leveraged ETF stress.
Key Takeaways
- The kospi has fallen roughly 25% from its 9,114.55 closing peak, confirming a bear market while remaining up about 60% year to date.
- Samsung Electronics and SK Hynix now make up just over half the index, so chip swings move the whole market.
- Twice-leveraged products tied to SK Hynix plunged more than 30% in one session as the stock dropped 14% in Seoul.
- Regulators are watching single-stock leveraged ETFs after retail margin use and foreign outflows amplified the selloff.
The reversal is a loud signal for global AI and memory trades. South Korea's benchmark led the world on the way up; its concentration in AI memory suppliers means the unwind is being watched from Seoul to Wall Street. More market alerts are tracked on our Fintech & Crypto Alerts hub.
Why did the kospi fall into a bear market?
By definition, a bear market starts after a drop of more than 20% from a recent peak. The kospi crossed that line after shedding about a quarter of its value from the late-June record close of 9,114.55 and later traded below 7,000.
The climb was powered by AI memory demand and explosive expectations for Samsung Electronics and SK Hynix. Those two names alone now account for just over half of the kospi, far above the weight of a single megacap in the S&P 500. When they sell off, the index has little ballast.
Even after the plunge, the kospi was still up around 60% in 2026, beating MSCI's broad global gauge's roughly 10% advance — hence the paradox of the "world's best" index in a bear phase.
How are AI stocks and chipmakers feeding the selloff?
Investors are reassessing whether AI spending and memory pricing can justify last year's valuations — a theme also flagged in coverage of Korean stocks and deepening AI stock fatigue.
SK Hynix, which roughly tripled in the boom and completed a record $26.5 billion U.S. listing by a foreign company, tumbled 14% in Seoul on one recent Monday. That session helped drag the kospi about 8% lower. U.S. memory names such as Micron have also faced heavy selling as AI fatigue spreads across chip peers.
Forecast profits for Samsung and SK Hynix have risen so fast that forward price-to-earnings ratios have actually fallen even as share prices more than doubled — yet traders are still cutting risk.
Did leveraged ETFs make the kospi crash worse?
Yes — according to market reports, leverage turned a chip selloff into a cascade. A twice-leveraged ETF tracking SK Hynix plunged more than 30% in Hong Kong on that same rough Monday, feeding mechanical selling.
South Korea's Financial Supervisory Service said it would monitor leveraged products and probe excessive marketing if needed. The Bank of Korea has also assessed whether single-stock ETFs could distort markets and lift volatility. The kospi's volatility index stood near 82 after a record high of 97.99 on June 29, versus about 29 at the end of 2025.
Foreign investors have pulled nearly $110 billion from South Korean equities this year, a record outflow, leaving leveraged retail buyers to shoulder more of the market. That mix helps explain why the kospi's AI boom is now flashing a caution light for chip and AI trades worldwide.