South Korea’s Kospi plunged nearly 10% on Tuesday, leading a broader Asian market sell-off as investors reassessed the sustainability of the AI-driven tech rally that has powered global equities this year.
The benchmark index closed down 910.71 points at 8,203.84, marking its steepest daily fall since early March. The sharp decline followed a tech-led downturn on Wall Street, where the Nasdaq slipped more than 1% amid weakness in major names including Nvidia, Amazon and Microsoft.
Heavyweight chipmakers Samsung Electronics and SK Hynix were at the centre of the rout, each dropping more than 12%, erasing billions in market value. The sell-off was severe enough to trigger a 20-minute market-wide trading halt in the afternoon session.
The Kospi had only recently crossed the 9,100-point milestone for the first time, underscoring how quickly sentiment has shifted in a market increasingly dominated by semiconductor stocks, which now account for more than half of total market capitalisation.
Elsewhere in Asia, Japan’s Nikkei 225 also fell sharply, closing down 3.55% at 69,788.38 as risk-off sentiment spread across regional exchanges.
Analysts said the volatility reflects concerns that the AI-fuelled rally may have run ahead of fundamentals, with retail participation and leverage playing a growing role in driving price swings.
“Volatility has blown out. (This kind of volatility) cannot be explained without heavy retail engagement,” said Alexander Redman, chief equity strategist at CLSA.
“What worries me is that retailers are in the driving seat, because they use a lot of margin, though the ratio to market cap is small. What is more worrying is that regulators have now allowed leveraged single security ETFs, pouring fuel onto the fire.”
The sell-off also comes amid rising regulatory scrutiny in South Korea, where authorities have warned about record levels of margin debt and the risks tied to leveraged products linked to leading chip stocks.
Despite the sharp pullback, the Kospi remains up nearly 95% year-to-date, though the latest session highlights how quickly momentum can reverse in overheated markets.
