Summary:
South Korea's KOSPI entered bear market territory after falling more than 20% from its June record high, as a sharp selloff in semiconductor and technology stocks weighed on investor sentiment. Concerns over AI spending, foreign investor selling, and renewed geopolitical tensions added to the market's weakness despite the index remaining sharply higher on a year-to-date basis.
Bear market conditions emerged for South Korean benchmark stock market index, the KOSPI, on July 8 due to the decline by 20% from its record level registered in June amid severe sell-off in tech sector and rising worries about the viability of the AI bubble.
With the KOSPI, being the best performing major stock market index globally in 2026, the index declined by more than 4% on Wednesday as it extended its losses for the third day in a row. The index was hovering at 7,248.78, down more than 20% from the level of 9,386 recorded as an all-time high. However, the index is still up 74% in the year-to-date period.
Tech Rout Triggers Market Decline
The most recent fall was mostly attributable to the fall in prices of semiconductor and technology equities. Samsung Electronics, which is the world's leading maker of memory chips, continued to suffer from intense selling pressure as its share price fell nearly 10% in just one day on Tuesday. The following day saw the share price fall further by 4%.
Despite the fact that Samsung has predicted a 19-times increase in second-quarter operating profit, this move was fueled by the divergence in market expectations versus results posted. Even though earnings were better than expected, investors had expected even better results due to the sharp run-up in memory chip stocks.
According to Albert Yong, the Managing Partner of Petra Capital Management, Samsung’s profits had already been incorporated in the price due to the sharp pre-result rally. Investors still have concerns about the future prospects of the AI boom and reduced expenditure on AI infrastructure by US technology companies.
AI Spending Concerns Weigh on Chip Stocks
Investor anxiety escalated after it was found that Chinese-based AI startup, DeepSeek, was looking to make its own semiconductor chip. Such a step may help in reducing dependence on the big chip producers of the world and bring changes to the competitive structure of the AI hardware industry.
The panic spread across all the stock markets of the world. In America, Nasdaq 100 was down 1.8% while S&P 500 dropped 0.4% on Tuesday. Chip stocks such as Intel, Micron, and AMD dropped up to 10%, while Philadelphia Semiconductor Index was off by nearly 5%.
According to the analysts, the expectations from the companies that have gained from the AI spending boom are now being reassessed by investors. Market experts believe that the long-term growth story for chip stocks is intact.
Foreign Selling and Geopolitical Tensions Add Pressure
Foreign investors have also become net sellers in the South Korean equity market as they have sold stocks amounting to 471.7 billion won (approximately ₹311.68 million) on Wednesday.
In addition, market sentiments have worsened amid the resurfacing geopolitical situation in the Middle East. Oil prices have gone up amid the United States striking again at Iran and revoking its waiver for selling oil in the global markets. While Brent crude touched an intraday high of 2.8%, MSCI Asia Pacific Index has fallen almost 1%.
However, despite the turbulence in recent times, Goldman Sachs is still positive on the South Korean equity market. The investment bank believes that foreign investments will gradually shift to the industrial and artificial intelligence (AI) sectors apart from the semiconductor sector due to earnings momentum.
