South Korean equities experienced their second trading suspension this week on Friday, as a sharp sell-off in heavyweight chipmakers triggered investor nervousness around the global artificial intelligence (AI) trade. The benchmark KOSPI plunged as much as 9% after trading resumed following a 20-minute circuit breaker.
Chip giants Samsung Electronics and SK Hynix each lost over 10% during the session. Overseas investors offloaded nearly 3 trillion won ($1.9 billion) worth of KOSPI shares in morning trade. This cautious mood extended to the US derivatives market, with futures tracking the Nasdaq 100 and the S&P 500 trading lower on Friday.
The latest selling marks a dramatic shift in sentiment. Just a day earlier, optimism surrounding AI-related stocks had lifted markets. On Thursday, upbeat guidance from Micron Technology and reports of SK Hynix exploring a US listing had fueled hopes that the semiconductor rally still had room to run.
However, investors quickly turned cautious as multiple concerns emerged simultaneously. Reports suggesting OpenAI could delay its IPO, Apple’s decision to raise product prices amid memory chip shortages, and expectations of massive capital expenditure announcements from South Korean chipmakers all prompted traders to reassess the outlook for the sector.
These developments have intensified concerns that the current AI-driven memory boom may be approaching a turning point. Charu Chanana, Chief Investment Strategist at Saxo Markets, stated that “The memory trade still has legs, but the tailwind is becoming increasingly selective while the headwind is much broader.” She added that investors are beginning to price in the risk that a stronger memory cycle may eventually weigh on the broader AI trade.
Speculation around a potential delay in OpenAI’s IPO, coupled with Apple’s price hikes, has reignited debate over whether the industry’s memory-chip driven growth cycle can be sustained, according to Homin Lee, strategist at Lombard Odier. He expects market volatility to remain elevated as leveraged positions continue to amplify price swings.
South Korea’s equity market has witnessed exceptional volatility this year. This is driven by heavy retail participation, widespread use of margin financing, and the growing popularity of leveraged exchange-traded funds linked to semiconductors.
The immediate future of the AI trade remains uncertain as market participants weigh conflicting signals. The interplay between corporate guidance, macroeconomic factors, and investor sentiment will dictate the trajectory of chipmakers and the broader technology sector.
Observers will watch for further announcements from major chipmakers and any updates regarding OpenAI’s potential IPO. The sustainability of demand for high-performance memory chips, crucial for AI applications, will be a key factor in determining market stability.