Kospi drops below 8,000 as semiconductor 'peak-out' fears slam markets

South Korean stocks took a direct hit Wednesday from fears of a semiconductor "peak-out" — a post-peak decline in demand — originating in the United States. The Kospi, which had been eyeing the 10,000 mark, broke below 8,000, and a sell-side sidecar was triggered in early trading. Foreign investors extended their selling streak to a 10th consecutive session, adding further pressure on the index.

According to Korea Exchange, the Kospi was down 6.15 percent at 7,792.93 as of 10 a.m. The index opened 370.31 points, or 4.46 percent, lower at 7,933.10 and continued to widen its losses.

As the Kospi plunged in early trading, a program sell-order sidecar — a temporary suspension of sell-side asking prices — was triggered at around 9:07 a.m. It was the 30th sidecar activation this year, prompting analysts to say Kospi volatility has reached an extreme. By comparison, the mechanism was triggered just three times last year and twice in 2024.

Samsung Electronics and SK hynix, the two pillars of the domestic market, saw their share prices fall 7 percent and 9 percent, respectively, in early trading. Samsung Electronics dropped below the 300,000 won ($193) mark, while SK hynix fell to the 2.3 million won range.

Both stocks have now shed more than 20 percent from their recent highs. Samsung Electronics hit its intraday peak of 374,500 won on June 19, while SK hynix reached 2.99 million won on June 25.

The two stocks together account for well over 50 percent of the Kospi's total market capitalization, and their sharp declines dragged the broader index lower.

The sell-off in the two chip giants was triggered by Meta's announcement that it would enter the cloud computing business. News that Meta — which had built massive computing infrastructure for artificial superintelligence development — plans to sell its excess capacity to outside customers stoked concerns about overinvestment by big tech companies and fears that semiconductor demand may have peaked.

Chip-related stocks tumbled overnight on Wall Street in response. Micron Technology fell 10.57 percent, SanDisk dropped 10.6 percent, AMD lost 6.89 percent, Intel declined 9.03 percent, and Nvidia slid 1.25 percent. The Philadelphia Semiconductor Index plunged 6.27 percent.

Heavy foreign selling also weighed on the index. Foreign investors net sold 3.13 trillion won worth of Kospi shares as of the same time. They have been on a selling streak for 10 consecutive trading sessions since June 19. In contrast, retail investors and institutional investors net bought 2.69 trillion won and 369.8 billion won, respectively, during the same period.

Among the top market-cap stocks, SK Square, Samsung Electronics preferred shares, Samsung Electro-Mechanics and Hyundai Motor were all trading lower.

On the other side, Hanwha Ocean — selected as the preferred bidder for the detailed design and lead-ship construction of South Korea's next-generation destroyer program — and Hanwha Aerospace, up 2.11 percent, were among the gainers.

The Kosdaq, which had closed up 1.44 percent on Tuesday to mark its 30th anniversary, gave back all of those gains in a single session and broke below the 900 mark. Among the top market-cap stocks on the index, most were lower, including Alteogen, Ecopro BM, Ecopro, Jusung Engineering and Rainbow Robotics. The won opened at 1,552.3 won per dollar in the Seoul foreign exchange market Wednesday, down 2.6 won from the previous session.

Han Ji-young, a researcher at Kiwoom Securities, said Meta — one of the hyperscaler companies that had driven the AI investment cycle and underpinned the narrative of "rising memory chip prices leading to improved semiconductor earnings" — may now be shifting from a buyer of computing power to a seller. "This is stoking market anxiety that demand may not be sufficient relative to the massive scale of investment hyperscalers have made," Han added.