South Korea’s KOSPI Drops 6% as Chipmakers Fall on AI Spending Fears and U.S. Tariffs

TLDR

• South Korea’s KOSPI fell over 6% on Friday, hitting an intraday low of 6,650.41 points
• SK Hynix and Samsung Electronics dropped between 6% and 10%, leading the decline
• Alphabet’s negative quarterly free cash flow raised fears over AI overspending
• A new U.S. 12.5% tariff on South Korea added pressure before a 15% cap was confirmed
• Hyundai Motor slid 8% after weak second-quarter earnings

South Korea’s KOSPI fell sharply on Friday, dropping more than 6% during the session. The selloff was driven by heavy losses in chipmaking stocks and fresh concerns about AI spending and U.S. trade tariffs.

The index hit an intraday low of 6,650.41 points before recovering slightly to 6,751.49 after Seoul confirmed the U.S. would honor an earlier trade deal capping tariffs at 15%.

The drop was part of a broader Asia-Pacific selloff. Japan’s Nikkei 225 fell 3%, Hong Kong’s Hang Seng dropped over 1%, and the Shanghai Composite lost 0.87%. Military escalations between the United States and Iran added to the pressure across the region.

Chipmakers Take the Hardest Hit

Samsung Electronics and SK Hynix were the biggest drags on the KOSPI. Both stocks fell between 6% and 10% on the day.

The declines followed a tough overnight session for U.S. tech stocks. Quarterly results from Alphabet and Tesla showed both companies were spending heavily on artificial intelligence, raising questions among investors about whether those costs are sustainable.

Alphabet’s results were a particular concern. The company posted its first ever negative quarterly free cash flow and raised its capital spending forecast for the year.

That spooked investors who have been looking for clearer returns from AI investment. The worry is that AI spending is now cutting into the profit margins of large tech companies rather than boosting them.

Samsung and SK Hynix had both benefited from strong AI-driven demand for memory chips over the past year. But that same growth made them more exposed when sentiment shifted.

Korean leveraged exchange-traded funds tied to the two stocks also added to the volatility, amplifying the day’s moves.

Hyundai and Trade Tariffs Add to the Pressure

Hyundai Motor fell 8% after its second-quarter earnings came in below expectations. The company has been dealing with U.S. trade tariffs as a headwind in recent quarters, and the new tariff announcement made that outlook worse.

The U.S. announced a 12.5% tariff on South Korea and a number of other countries. That hit export-heavy sectors hard before Seoul secured the 15% cap confirmation later in the day.

The KOSPI closed at 6,690.62, down 5.72% on the day.

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