Kospi eyes rebound on Korea-US AI alliance news after breaking 7,000

All eyes are on whether the Kospi can stage a rebound Monday, buoyed by news of a Korea-US AI alliance and bargain hunting after Friday's steep selloff.

The Kospi closed Friday down 5.72 percent at 6,690.62, according to Korea Exchange.

The index opened at 7,000.78, already down 96.11 points, or 1.35 percent, from the previous session, before losses deepened through the day.

At one point the index slid as low as 6,650.41, prompting the activation of a sell-side sidecar circuit breaker in the morning session.

Foreign investors, who had been net buyers for four consecutive sessions, flipped to net selling of more than 3 trillion won ($2.04 billion), while institutional investors offloaded nearly 2 trillion won, together dragging the index lower.

The selloff was driven by a renewed deterioration in Middle East tensions that sent international oil prices surging. Brent crude futures had already broken through $100 per barrel, while West Texas Intermediate traded above $90.

Adding to market anxiety, Google parent Alphabet disclosed that its cash flow had turned negative as a result of heavy AI infrastructure investment.

Major semiconductor stocks bore the brunt of the selling. Samsung Electronics fell 7.59 percent, dropping below the 250,000 won mark, while SK hynix plunged 8.34 percent to close the regular session at 1,759,000 won.

Asian markets broadly declined as well. Japan's Nikkei 225 fell 2.73 percent and Taiwan's Taiex dropped 2.67 percent.

The selling in semiconductor shares carried over to Wall Street, where the tech-heavy NASDAQ Composite fell 0.64 percent from the prior session.

Intel reported second-quarter earnings that beat market expectations, but the stock still fell 7.9 percent amid doubts about its ability to win new foundry customers going forward.

Other chipmakers also declined — Broadcom fell 2.7 percent, AMD dropped 3.3 percent and Micron lost 7.0 percent.

The Philadelphia Semiconductor Index fell 4.3 percent, and SK hynix's American depositary receipts dropped 8.8 percent.

Analysts attributed the broad weakness to lingering market concerns about the profitability of corporate AI capital expenditure.

Still, there was a bright spot amid the semiconductor gloom. Over the weekend, news emerged from San Francisco of a massive AI cooperation deal between major Korean and US companies worth $950 billion.

On the sidelines of the "San Francisco AI Summit," Korean companies including Samsung, SK, Hyundai Motor Group and Naver, along with global AI firms such as Nvidia, OpenAI, Broadcom and Anthropic, announced a series of large-scale investment and supply chain partnerships.

SK Group and Nvidia in particular agreed to pursue a comprehensive partnership valued at more than $500 billion, covering everything from building AI factories to supplying next-generation AI memory chips.

Against that backdrop, the Kospi is expected to seek a rebound Monday, supported by anticipated bargain buying after Friday's sharp drop and the news of large-scale Korea-US corporate cooperation.

Foreign media reports over the weekend that the United States and Iran had halted airstrikes are also expected to provide relief to markets.

International oil prices, which had weighed heavily on domestic markets last week, fell back as a result, with WTI retreating to the $80 range.

The yield on the 10-year US Treasury note also eased to around 4.6 percent, and the won weakened to 1,458.50 against the dollar.

Lee Gyeong-min, an analyst at Daishin Securities, said earnings releases and conference calls from SK hynix on Wednesday and Samsung Electronics on Thursday, along with results from other big tech companies, could help rein in uncertainty over the AI industry and semiconductor sector and revive expectations for earnings improvement. "Fluctuations in the Kospi's 6,000 range early this week represent an opportunity to build positions," he said.

Han Ji-yeong, an analyst at Kiwoom Securities, said the Korean market's volatility continues to exceed normal bounds, but added that the premise of a medium-term bottom — from both a valuation and technical standpoint — remains intact. "The key question is how much rebound energy the market can accumulate going forward," she said.