South Korean Stocks Slide Deeper as AI Spending Concerns Weigh on Chipmakers

South Korea's stock market extended its losses, pushing the benchmark Kospi toward bear-market territory as investors reassessed the outlook for artificial intelligence (AI)-driven semiconductor demand.

South Korean semiconductor stocks declined amid growing investor concerns over the sustainability of artificial intelligence-related spending. (Photo: Yonhap News Agency)

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According to Bloomberg News, the Kospi fell as much as 5.7%, bringing its decline from last month's record high to about 20%.

Memory chipmaker SK Hynix dropped as much as 5%, while Samsung Electronics fell 6.9%.

Although South Korea has been among the world's best-performing equity markets this year, its heavy reliance on the semiconductor sector has left it vulnerable to shifts in investor sentiment toward AI-related spending. Leveraged exchange-traded funds have also amplified market volatility.

Chip stocks continued to decline despite Samsung Electronics reporting a 19-fold increase in quarterly profit earlier this week, highlighting investor concerns that massive AI investments may become difficult to justify.

"A lot of this increase in volatility is driven by fundamental uncertainty," said Ian Samson, portfolio manager at Fidelity International.

"We are seeing real, huge demand for all kinds of semiconductors driven by AI, but this is really just being driven by around $1 trillion of capex controlled by a handful of huge tech companies," he said, warning that spending could slow if investment proves unsustainable.