South Korea’s KOSPI index experienced a wild two-day ride, first closing up roughly 1% on Monday, July 27, buoyed by fresh AI and robotics funding, only to crash 10.8% the following day — its worst session in years — after a report stoked fears that Chinese chipmakers are accelerating their push to narrow the technology gap.
The positive start came as the index rose to 6,755.75, driven by Seoul’s recently unveiled $1 trillion plan for semiconductors, AI data centers, and robotics, and reinforced by KB Financial Group’s announcement of a 150 billion won (~$100 million) venture fund aimed at advanced tech sectors including AI, semiconductors, and mobility. The government also leveraged a visit by President Lee Jae-myung to San Francisco, where he urged six major U.S. venture firms — including Andreessen Horowitz, Sequoia Capital, and General Catalyst — to back South Korean startups, with the National Pension Service signing an investment cooperation MOU.
The optimism evaporated on Tuesday when The Information reported that China has begun mass production of homegrown deep ultraviolet (DUV) chipmaking tools, raising fears that Chinese companies could close the technology gap more quickly than expected. The news triggered heavy selling across Asian markets: Samsung Electronics fell 13.4%, SK Hynix plummeted 14.7%, and the KOSPI closed at 6,023.66, its lowest since April. Trading was halted multiple times due to the speed of the decline. Shares of Chinese memory chipmaker CXMT, which had surged 466% on its Shanghai debut, also fell 4% on Tuesday.
The sell-off was not confined to Korea. Japan’s Nikkei 225 dropped 4%, Taiwan’s Taiex fell 4.7% with TSMC off 3%, and U.S. chip stocks like Nvidia and AMD had already fallen more than 5% on Monday. Oil prices also declined amid easing U.S.-Iran tensions. Morningstar’s equity analyst Jing Jie Yu called the reaction “largely a knee-jerk reaction and overdone,” arguing that global chip leaders’ dominant positions are not meaningfully threatened.
The turbulence highlights how sensitive markets have become to the AI narrative and geopolitical competition in the semiconductor space, with both Korea’s aggressive public-private funding push and sudden shifts in sentiment capable of whipsawing indices.
