Kospi tumbles over 3% as Alphabet's plunge rattles AI sentiment; SK hynix drops 6%

The Kospi tumbled more than 3% in early trading Friday, falling below the 5,750 level. A sell-off in domestic semiconductor stocks spread after Google parent Alphabet plunged more than 12% on Wall Street overnight.

As of 9:17 a.m., the Kospi stood at 5,729, down 208.66 points, or 3.51%, from the previous session.

The index opened down 177.31 points, or 2.99%, at 5,760.35 before extending its losses.

On the Kospi market, foreign and institutional investors were net sellers of 98.3 billion won ($73.6 million) and 162 billion won, respectively, weighing on the index. Retail investors were the sole net buyers, picking up 231.9 billion won.

All three major Wall Street indexes closed lower overnight. The Dow Jones Industrial Average fell 132.54 points, or 0.25%, to 52,342.56 on the New York Stock Exchange on Thursday (local time).

The S&P 500 dropped 23.59 points, or 0.30%, to 7,720.39, while the NASDAQ Composite slid 365.13 points, or 1.38%, to 26,184.72.

Alphabet closed down 12.6% at $283.82, wiping out roughly $500 billion in market cap in a single session.

The sell-off was driven by third-quarter earnings that fell short of market expectations. Google's third-quarter search revenue came in at about $63 billion, up 12% year-on-year but below the market consensus of $65 billion. The growth rate of paid clicks on search ads also slowed, from 13% in the second quarter to 8% in the third.

A deterioration in cash flow further dampened investor sentiment. Alphabet posted a free cash flow deficit of $9.1 billion — marking the first time since its listing that it recorded negative free cash flow for two consecutive quarters.

The shock rippled through semiconductor stocks. As concerns mounted over the burden of AI investment and funding, the Philadelphia Semiconductor Index fell 1.42%. Micron (-4.98%), SanDisk (-5.32%) and Nvidia (-0.80%) all declined.

South Korea's two semiconductor giants were also hit hard. Samsung Electronics was trading down 3.88% at 223,000 won, while SK hynix fell 6.75% to 1.42 million won.

Seo Sang-young, a managing director at Mirae Asset Securities, said the Kospi was expected to open lower, citing Alphabet's deteriorating free cash flow and concerns over AI investment returns that pushed the US semiconductor index down 1.42%, along with Intel's sharp after-hours drop on weak guidance and Amazon's decline on a disappointing outlook.

Seo added that given the recent semiconductor-focused share price volatility being driven more by foreign investor flows and shifts in sentiment than by corporate earnings, foreign futures and spot trading during the session would be key.

Among large-cap stocks, SK Square (-5.88%), Samsung Electro-Mechanics (-6.96%) and Hyundai Motor (1.71%) were all lower. LG Energy Solution (+1.40%) and Samsung Biologics (+2.86%) were trading higher.

At the same time, the Kosdaq was down 17.01 points, or 2.26%, at 736.22, after opening 15.47 points, or 2.05%, lower at 737.76.

On the Kosdaq market, foreign and institutional investors were net sellers of 27.4 billion won and 32.5 billion won, respectively, while retail investors were net buyers of 70.1 billion won.

Among Kosdaq large-cap stocks, Jusung Engineering (-2.43%), Rainbow Robotics (-3.44%) and EO Technics (-4.22%) were all declining.