KOSPI Slides Sharply as AI Industry Skepticism Spreads from U.S. Markets

 South Korea’s stock market experienced a significant downturn on Tuesday, as growing skepticism surrounding the global artificial intelligence (AI) industry weighed heavily on investor sentiment. The decline followed overnight losses on Wall Street, where concerns about the sustainability of AI-driven growth began to overshadow strong corporate earnings.

As of 9:20 a.m. local time, the KOSPI index had fallen 2.14% from the previous session, shedding 89.28 points to trade at 4,077.88. The benchmark index opened even lower, down 2.72%, and remained under pressure throughout the morning, reflecting widespread risk-off sentiment across the market.

Wall Street Weakness Fuels Global Market Anxiety

The downturn in Korean equities closely followed declines in the U.S. stock market last Friday. All three major U.S. indices closed lower, signaling a shift in market mood.

The Dow Jones Industrial Average fell 245.96 points, or 0.51%, ending the session at 48,458.05. The S&P 500 dropped 1.07% to 6,827.41, while the Nasdaq Composite suffered a sharper decline, plunging 1.69% to close at 23,195.17.

While U.S. AI semiconductor giant Broadcom posted earnings that exceeded market expectations, investor confidence was shaken by cautious commentary from the company’s management regarding future growth prospects. This triggered renewed debate over whether the AI sector can maintain its current pace of expansion.

Broadcom’s Outlook Raises Questions About AI Profitability

During an earnings call, Broadcom CEO Hock Tan acknowledged the company’s strong AI-related revenue growth but pointed out a critical issue: AI products currently generate lower gross margins compared to non-AI segments.

He also stated that Broadcom’s non-AI revenue for the first quarter is expected to remain flat year-on-year, suggesting that AI alone may not be enough to offset slower growth elsewhere. These remarks fueled broader concerns that the AI boom, while impressive in scale, may not yet be translating into sustainable profitability across the industry.

This cautious outlook resonated strongly in Asian markets, particularly in South Korea, where semiconductor and technology stocks play a dominant role in major indices.

Semiconductor and Technology Stocks Lead the Decline

On the KOSPI, nearly all major stocks recorded losses. Among the top 10 companies by market capitalization, only Samsung Biologics managed to post a modest gain of 0.30%. Heavyweights such as Samsung Electronics and SK Hynix suffered sharp declines of 3.76% and 4.29%, respectively, highlighting investor sensitivity to negative signals from the global AI and chip sectors.

Other major stocks also moved lower, including LG Energy Solution (-1.91%), Hyundai Motor (-1.82%), HD Hyundai Heavy Industries (-2.79%), Doosan Enerbility (-3.39%), Kia (-1.43%), Hanwha Aerospace (-3.75%), and KB Financial Group (-1.11%).

Sector-wise, losses were particularly pronounced in construction (-5.07%), electrical and electronics (-3.46%), securities (-2.47%), manufacturing (-2.43%), and machinery and equipment (-2.29%). These declines reflect broad-based selling rather than isolated weakness.

Defensive Sectors Show Relative Strength

Despite the overall market weakness, several defensive sectors recorded gains, suggesting that investors are selectively reallocating capital rather than exiting the market entirely.

Metal stocks rose 1.14%, while pharmaceutical shares gained 0.49%. Textile and apparel stocks, along with food and tobacco companies, edged up 0.19%. Utilities, including electricity and gas providers, also posted a small gain of 0.10%. These sectors are traditionally viewed as more resilient during periods of economic uncertainty.

Foreign and Institutional Investors Continue to Sell

Investor flow data revealed a clear divergence in market behavior. Foreign investors sold approximately 341.8 billion won worth of stocks, while institutional investors offloaded around 107.3 billion won. In contrast, individual investors stepped in as net buyers, purchasing roughly 440.3 billion won in shares.

This pattern reflects a familiar dynamic in Korean markets, where retail investors often attempt to buy the dip during sharp corrections, while foreign and institutional players adopt a more cautious stance amid global uncertainty.

KOSDAQ Also Under Pressure, with Selective Biotech Gains

The KOSDAQ index, which is more heavily weighted toward growth and technology stocks, also moved lower. As of the same time, the index was down 0.92%, or 8.60 points, trading at 928.74.

Foreign and institutional investors sold 9.7 billion won and 31.4 billion won worth of KOSDAQ stocks, respectively, while individuals bought a net 52.5 billion won.

Most of the top KOSDAQ-listed companies were in negative territory. EcoPro BM (-1.19%), EcoPro (-1.35%), Rainbow Robotics (-1.04%), Kolon TissueGene (-1.11%), HLB (-1.66%), Peptron (-1.40%), and Samchundang Pharm (-1.53%) all declined.

However, several biotechnology stocks bucked the trend. Alteogen rose 1.50%, ABL Bio gained 1.21%, and LigaChem Bio edged up 0.06%, reflecting ongoing investor interest in biotech innovation despite broader market weakness.

Korean Won Weakens Against the U.S. Dollar

In the foreign exchange market, the Korean won weakened slightly against the U.S. dollar. The dollar-won exchange rate opened at 1,476.0 won per dollar, down 2.3 won from the previous session.

The weaker won reflects a combination of global risk aversion and capital outflows from emerging markets, as investors seek safety amid uncertainty surrounding global growth and the future trajectory of the AI sector.

Looking Ahead: Volatility Likely to Persist

The sharp decline in Korean equities underscores how closely local markets remain tied to global sentiment, particularly developments in the U.S. technology sector. While AI continues to be viewed as a long-term growth driver, recent events suggest that investors are becoming more discerning, focusing not only on growth potential but also on profitability and margins.

In the near term, market volatility is likely to persist as investors digest mixed signals from corporate earnings, central bank policies, and global economic indicators. For long-term investors, this period may serve as a reminder that even transformative technologies like AI are not immune to cyclical market corrections.

As always, maintaining a balanced perspective and a diversified approach remains essential in navigating uncertain market conditions.

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