South Korea stock market boom collapses in AI selloff
The South Korea stock market boom is collapsing after the KOSPI plunged nearly 11%, then about 6%, across two sessions—wiping as much as $2.18 trillion. An AI-chip rally unwound as SK Hynix earnings, though up sixfold, missed lofty expectations and sparked leveraged retail selling.
Key Takeaways
- The KOSPI fell nearly 11% then closed about 6% lower after diving as much as 12.6% intraday in a historic two-day rout.
- Seoul equities lost as much as $2.18 trillion as an AI-fueled chip rally reversed.
- SK Hynix reported a six-fold profit jump but still missed expectations; shares closed down 9.6%.
- Samsung Electronics and SK Hynix make up more than half of KOSPI market value.
- Officials plan curbs on single-stock leveraged ETFs after apologizing for their rushed rollout.
What weeks ago looked like the hottest trade in global markets—buying Korean chipmakers riding AI demand—turned into forced selling. Volumes were light, buyers stepped aside, and brokers shut losing leveraged positions, amplifying the drop, according to Reuters.
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Why did the South Korea stock market crash so fast?
The selloff is a crowded AI trade unwinding. Small investors had used borrowed money and leveraged products to pile into memory-chip winners. That leverage turbocharged the rally—and is now turbocharging the reverse.
Bloomberg reported a roughly 16% two-day plunge fueled by a burst of retail selling, with circuit breakers tripped for a second straight day. From a peak little more than a month earlier, the index has erased almost 40% of its value and is on course for its steepest monthly decline on record.
How did SK Hynix earnings spark the panic?
SK Hynix posted a six-fold jump in profit, yet results lagged the sky-high forecasts baked into AI valuations. Shares slumped nearly 20% before closing down 9.6%. Samsung Electronics fell as much as 14% and closed down 5.2%.
Together the two giants dominate the index. When they crack, so does the KOSPI. Analysts also flagged scant detail on shareholder returns and lingering doubts over whether hyperscaler AI spending can justify chip valuations.
What are Korean regulators doing now?
Finance Minister Koo Yun-cheol apologized for single-stock leveraged ETFs, saying they had not been considered carefully enough. After an emergency meeting with the Bank of Korea and financial regulators, the finance ministry said it would pursue investment limits—citing a cap of up to 20% of an investor's total investment—higher trading costs, and simulated trading requirements.
Despite the rout, the KOSPI remains up about 41.5% in U.S. dollar terms year-to-date, still the best-performing major market in 2026—though strategists warn further leverage unwinds could follow.