South Korea’s KOSPI index moved closer to bear market territory on Wednesday as local chipmaking stocks continued to fall.
The selloff came even after Samsung Electronics reported record second-quarter profit. However, investors remained concerned about stretched technology valuations and whether the recent AI-driven rally can continue.
KOSPI Slides Toward Bear Market Territory
The KOSPI dropped as much as 5.4% to a near three-week low of 7,222.60 points.
That level was more than 20% below the index’s June 19 record high of 9,385.59 points.
If the index closed near its intraday low, it would officially enter a bear market.
A bear market is usually defined as a decline of 20% or more from a recent peak.
Samsung Falls Despite Record Profit
Losses in South Korean chip stocks led the broader market lower.
Samsung Electronics fell as much as 6%, even after the memory chip giant posted a record-high second-quarter profit.
However, Samsung’s revenue missed some elevated market expectations. This raised questions about whether the company can maintain strong AI-driven growth in the coming quarters.
Investors Lock In Samsung Profits
The concerns gave investors a reason to take profits in Samsung.
The stock had more than doubled over the past year, supported by strong demand linked to artificial intelligence and memory chips.
After such a powerful rally, traders appeared more willing to sell on any sign of weakness.
SK Hynix Extends Losses
Samsung rival SK Hynix also came under pressure.
The stock fell as much as 5% on Wednesday after dropping 6% in the previous session.
The decline added further pressure to the KOSPI, which is heavily exposed to major semiconductor names.
Leverage Adds Pressure to Chip Stocks
The selloff in chipmaking shares was made worse by high levels of leverage in the sector.
Several leveraged and inverse ETFs have launched since May, increasing the potential for sharper moves when sentiment turns negative.
As chip stocks fell, forced selling and leveraged positioning may have amplified the decline.
Apple Supplier Report Hits Sentiment
Memory chip makers were also pressured by a report that Apple could turn to Chinese suppliers.
The report suggested Apple may consider Chinese producers due to supply shortages among South Korean chipmakers.
If this trend develops, it could weigh on memory chip prices over the medium term.
AI-Linked Stocks Also Fall
The weakness was not limited to semiconductor stocks.
Other companies linked to the AI theme also declined on Wednesday.
Hyundai Motor fell 4.7%, weighing further on the KOSPI. The stock had rallied around 120% over the past 12 months due to Nvidia partnerships and plans in physical AI.
AI Rally Faces Sustainability Concerns
The KOSPI has been one of the strongest-performing global stock indexes this year.
Much of that rally was driven by optimism around artificial intelligence, memory chips, and South Korea’s technology sector.
However, the recent selloff shows that investors are becoming more cautious.
Volatility has increased, and questions are growing over whether high AI-related valuations can remain sustainable in the near future.
