[Breaking] Sell-side car activated as KOSPI plunges

South Korea's KOSPI stock index experienced a sharp decline of 4% on July 16, leading to the activation of a sell-side "car" mechanism, which temporarily halts program trading.

The index fell below the 7,000-point threshold, reversing significant gains made just the previous day when it had surged over 6% and triggered a buy-side "car." This rapid reversal suggests a significant shift in investor sentiment.

The primary driver for the downturn appears to be renewed concerns regarding the long-term viability of investments in artificial intelligence (AI) infrastructure. Stocks of major technology companies, including Samsung Electronics and SK Hynix, saw sharp drops in early trading.

These concerns were amplified by a report from Morgan Stanley, which analyzed potential project cancellations and delays in data center construction. The report cited reasons such as electricity price hikes and environmental burdens, suggesting that previously discussed AI infrastructure investment risks are now materializing and significantly dampening investor confidence.

This sentiment was echoed in the U.S. market overnight, where the Philadelphia Semiconductor Index fell 2.1%. Major U.S. semiconductor stocks, including Micron, Intel, AMD, and Lam Research, all experienced notable declines, further contributing to the negative outlook for the tech sector.