Explained: Why South Korea’s AI chip winners became the

What happened

The dream run of AI-linked stocks seems to be losing momentum, turning the stock market’s biggest winners into some of its most high-profile losers. 66. 06 per cent. Despite this correction, the KOSPI has enjoyed a stellar run and remains up over 85 per cent for the year.

“The concentration risk in investment in these stocks have turned FPIs aggressive sellers in these stocks,” Vijayakumar observed. “The sell-off in AI stocks in the US yesterday triggered the panic selling in the chip stocks today. “When you inject those fundamental anxiety drivers into a market heavily exposed to leveraged ETFs, the rebalancing mechanics inevitably trigger a sharp, self-reinforcing sell-off,” Agrawal added.

Why it matters

This keeps it firmly positioned as one of the world’s best-performing major equity markets, even after weathering multiple crashes in recent months– by nearly 9 per cent on July 13, 2026, over 7 per cent on July 2, 2026 and about 10 per cent on June 23, 2026. The catalystsOne of the primary catalysts behind both the historic rally and selloff lies in South Korea’s dominance in AI-linked memory chips.

The equity market had grown concentrated around two semiconductor titans—Samsung Electronics Co Ltd and SK Hynix Inc, which supply the advanced memory hardware crucial to global AI data centres. Both these firms together account for about 52 per cent of Kospi’s market cap and weighting. Over the past year, Samsung shares rocketed over 212 per cent, while SK Hynix delivered a staggering 490 per cent surge.

These steep domestic losses followed on the heels of Nvidia Corp's newest round of $750 billion in AI infrastructure deals, a massive figure that spiked investor anxieties regarding bloated AI-related capital expenditures. Factors behind selloffAccording to Rajiv Berlia, equity research analyst at JM Financial Institutional Securities, “there was no single trigger behind the sharp selloff in chipmakers; rather, several factors converged at the same time”.

Berlia explained that the global AI trade is unwinding as investors grow wary of stretched valuations and question the long-term sustainability of hyperscale AI infrastructure spending, noting “while China’s emergence as a credible memory-chip competitor could also be a reason”. While acknowledging Samsung and SK Hynix’s spectacular and unprecedented profits, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, warned of growing fears that this cyclical peak may be unsustainable.

What to watch

Santosh Meena, Head of Research at Swastika Investmart Ltd, noted that semiconductor giants were responsible for the bulk of the index's collapse. S. -listed ADRs slipped below their IPO price overnight.

“Combined with lingering doubts about oversupply risks from Korean makers’ own aggressive expansion plans and questions over the sustainability of hyperscaler AI capex, these factors triggered a concentrated sell-off in the stocks that had previously led the KOSPI higher,” Meena added.