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KOSPI plunges into bear market territory amid AI semiconductor concerns

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

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  • The KOSPI has entered a technical bear market, falling over 20% from its recent peak, with the index closing below 6,500 points.
  • The sharp decline is attributed to worsening semiconductor industry outlooks, triggered by concerns over AI demand and the justification of massive capital expenditures.
  • Global semiconductor stocks have also seen significant drops, with the Philadelphia Semiconductor Index entering its own bear market.

South Korea's KOSPI index has officially entered a technical bear market, marking a significant downturn after a period of rapid gains fueled by artificial intelligence optimism. The index closed at 6,516.27 on July 20, a staggering 28.5% drop from its recent high of 9,114.55 on June 22. This sustained decline, exceeding the 20% threshold, signals a bear market, a term colloquially known as 'the bear market' due to the resemblance of a bear swiping its paws downwards to stock price movements.

A drop of over 20% in less than two weeks is unprecedented in history.

— Na Jeong-hwanNH Investment & Securities researcher, commenting on the speed of the KOSPI's decline.

The rapid descent has been particularly sharp, with the KOSPI experiencing a more than 20% fall within just two weeks from its peak. Analysts describe this swift decline as historically unprecedented for a bear market, especially without the manifestation of major global risks. "A drop of over 20% in less than two weeks is unprecedented in history," noted Na Jeong-hwan, a researcher at NH Investment & Securities.

A drop of this magnitude is rarely seen unless a critical global risk event occurs.

— Jo Byeong-hyeonDaol Investment & Securities researcher, assessing the severity of the market downturn.

The primary driver behind this market correction is the deteriorating outlook for the semiconductor industry. Concerns have intensified following the unveiling of Moonshot AI's 'Kimi K3' in China, which boasts low cost and high performance. This development has fueled doubts about the justification for massive capital expenditures by major tech firms and raised fears of a slowdown in AI infrastructure and semiconductor demand.

We cannot take the global semiconductor stock correction lightly. The semiconductor index has entered a technical bear market.

— Kim Seok-hwanMirae Asset Securities researcher, discussing the implications of the semiconductor sector's performance.

This sentiment is mirrored in global markets. The Philadelphia Semiconductor Index, a key benchmark for the industry, has also entered a bear market, falling 20.2% from its high of 14,634.72 on June 22 to 11,684.14 by July 17. "We cannot take the global semiconductor stock correction lightly. The semiconductor index has entered a technical bear market," stated Kim Seok-hwan, a researcher at Mirae Asset Securities. "The market's question has shifted from 'Does AI demand exist?' to 'Can massive AI facility investments justify future profits?'"

The market's question has shifted from 'Does AI demand exist?' to 'Can massive AI facility investments justify future profits?'

— Kim Seok-hwanMirae Asset Securities researcher, highlighting the evolving concerns in the AI and semiconductor market.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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