The South Korean stock market suffered a sharp selloff on Thursday, with the KOSPI Index plunging more than 6% shortly after the opening bell, triggering a five-minute sidecar trading halt. The decline was led by heavyweight memory chip makers Samsung Electronics and SK Hynix, which fell 7.3% and nearly 9% respectively.
The rout in chip stocks was sparked by a report from The Information claiming OpenAI had developed software that could cut AI inference requirements in half, raising fears that future AI models would need fewer chips. This was compounded by news that Meta Platforms plans to sell excess cloud computing capacity, suggesting companies could optimize existing hardware instead of buying new chips. Additionally, reports that Apple was lobbying to purchase memory chips from blacklisted Chinese producers added further pressure on the current supply chain.
The selloff spread across Asia, with Japan’s Kioxia dropping more than 15% and dragging the Nikkei 225 down over 2%. Market analyst Fabien Yip of IG noted that profit-taking appeared to be a key driver, given that SK Hynix is still up over 200% this year and the KOSPI itself has gained nearly 83% in 2026.
Despite the turmoil, Morningstar raised its fair value estimates for Samsung and SK Hynix, citing strong AI demand and tight supply. However, the firm also flagged a longer-term risk of a memory supply surge over the next two years that could lead to a downturn around 2029-2030. Meanwhile, South Korean investors face additional risks from record margin debt exceeding $11 billion, which could accelerate selling in a market reversal.
The KOSPI broke below a key ascending channel support and its 25-day moving average, with analysts pointing to the 7,000 level as a potential downside target. Although a sharp recovery remains possible, volatility is expected to intensify ahead of the US nonfarm payrolls report.
