South Korea’s stock market took a heavy hit on Tuesday as fears over Chinese competition in the chip industry rattled investors across Asia.
The Kospi index closed 10.8% lower at 6,023.66, its weakest close since April. Trading was temporarily halted multiple times during the session due to the speed of the decline.
Samsung Electronics fell 13.4% while SK Hynix dropped 14.7%. SK Hynix had only recently listed on Wall Street, pricing its IPO at $149 per share. On Monday, those U.S.-traded shares closed at $143, already below the IPO price.
The sell-off was sparked by a report from tech publication The Information. It said China has begun mass production of homegrown deep ultraviolet, or DUV, chipmaking tools — equipment used to print circuit patterns onto silicon wafers.
This raised fears that Chinese chipmakers could close the technology gap with global leaders faster than expected.
Adding to the pressure, Chinese memory chipmaker CXMT made its Shanghai stock market debut on Monday with a 466% price surge. The company raised at least $8.6 billion in its IPO. Its shares then fell 4% on Tuesday.
Analysts at Morningstar said the market was “spooked” by China’s chipmaking progress. Equity analyst Jing Jie Yu said the sell-off was “largely a knee-jerk reaction and overdone,” adding that the dominant position of global chip leaders is unlikely to be threatened meaningfully.
The sell-off spread across Asia. Tokyo’s Nikkei 225 dropped 4% to 62,364.92. Taiwan’s Taiex fell 4.7%, with TSMC shares declining 3%.
Hong Kong’s Hang Seng bucked the trend, gaining 0.3%. Shanghai’s Composite index fell 1.2%.
Back in the U.S., chipmaker stocks had already been under pressure on Monday. Nvidia dropped 5%, Advanced Micro Devices fell 5.2%, and Micron Technology lost 2.3%.
Oil prices also fell more than 2% as tensions between the U.S. and Iran showed signs of easing. Brent crude dropped to $84.07 a barrel, while U.S. benchmark crude fell to $80.99.
The S&P 500 was nearly flat on Monday while the Dow Jones Industrial Average rose 0.5%. The Nasdaq edged 0.2% lower.
Traders said some of the selling reflects profit-taking after a long rally in AI-related stocks. Concern about whether the AI boom can justify current valuations has been building for months.
The Kospi’s sharp drop on Tuesday is one of the single largest daily moves for the index in recent years.
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