South Korean Stocks Crash as AI Bubble Bursts
The KOSPI index plummeted nearly 40% from its peak over two days, erasing $2.18 trillion in value amid a semiconductor sell-off and Chinese competition.
The Korea Composite Stock Price Index (KOSPI) suffered a historic collapse on July 28 and 29, 2026, erasing approximately $2.18 trillion in market value. The index plunged between 10.8% and 12.6% on Tuesday and Wednesday, marking one of the worst two-day declines in its history and wiping out nearly 40% of its value from a June peak of 9,106.
The rout was driven by a massive sell-off in semiconductor giants Samsung Electronics and SK Hynix. Investors questioned the sustainability of AI infrastructure spending and high valuations. SK Hynix shares plummeted nearly 20% on Wednesday after its quarterly operating profit of 60.5 trillion won failed to meet analyst expectations, despite a six-fold year-over-year increase. Market sentiment was further damaged by the record-breaking IPO of Chinese chipmaker ChangXin Memory Technologies (CXMT) and reports that a state-backed Chinese firm, Shanghai Yuliangsheng Technology, began mass-producing immersion DUV lithography machines to circumvent Western export controls.
Volatility was exacerbated by high levels of leverage among retail investors using single-stock ETFs, leading to forced liquidations. The crash triggered multiple sidecar mechanisms and circuit breakers to halt trading. In response, Finance Minister Koo Yun-cheol apologized for the introduction of single-stock leveraged ETFs and announced that the government is pursuing immediate curbs, including individual investment limits and higher trading costs, to stabilize the market.
