South Korea's KOSPI index fell sharply due to concerns about spending in the artificial intelligence sector

South Korea's leading stock index KOSPI fell more than 10% on Tuesday, triggering a temporary trading halt mechanism (circuit breaker) on the market. The main cause of the decline was strong selling in the semiconductor sector and growing investor skepticism about the effectiveness of massive spending on artificial intelligence infrastructure.

The index fell 11.3% and reached 5,992.91 points — its lowest level since mid-April, though losses were partially recovered later, and the day ended with a 10.8% decline at 6,023.66 points.

Trading was temporarily halted for 20 minutes after the index's decline exceeded 8%.

South Korea's chip sector suffered the most significant losses. SK Hynix, a memory chip manufacturer, fell 14.4%, continuing the losses from the previous night when the company's American shares traded below their IPO price.

Samsung Electronics shares also declined 13.6%. Together, both companies represent more than half of the KOSPI index's weighting, so their decline exerted strong pressure on the overall market.

The selling wave began after NVIDIA shares fell nearly 5%. This was triggered by a Wall Street Journal report stating that NVIDIA may provide financial assistance to OpenAI for implementing a large-scale data center project. Investors interpreted this move as an additional sign that AI infrastructure spending may have grown excessive and company valuations may be inflated.

Additional market concerns were raised by the rapid development of China's semiconductor industry. Particular attention was drawn to the successful debut of CXMT, a memory chip manufacturer, and China's progress in lithography technologies, which increases competitive risk for South Korean chip manufacturers.