South Korean equities endured another turbulent week from Aug 3 to Aug 7, with sharp swings in semiconductor heavyweights keeping the benchmark Kospi under pressure as investors continued to reassess the sustainability of the artificial intelligence (AI)-driven rally.
The week began on a weak note, with the Kospi tumbling about 5% on Aug 3 as Samsung Electronics and SK Hynix each fell roughly 9%. The decline reversed part of the previous session’s record rebound and highlighted continued instability following July’s severe sell-off, which had been amplified by forced deleveraging and heavy exposure to leveraged investment products.
Sentiment briefly improved midweek. The Kospi rebounded around 4% on Wednesday as investors returned to beaten-down technology shares. Goldman Sachs maintained its bullish view on South Korean equities, arguing that the sell-off in AI-related stocks had gone too far and that demand for memory chips remained supported by continued AI infrastructure investment.
However, the recovery proved short-lived. On Aug 6, the Kospi plunged 4.6%, with SK Hynix sinking 10.4% and Samsung Electronics losing 6.3% as renewed concerns over AI valuations and technology spending triggered another semiconductor sell-off across global markets.
Trading remained volatile into the following day as investors weighed US corporate earnings and uncertainty surrounding future AI spending. The broader downturn has also begun reshaping domestic investor behaviour, with South Korean retail investors purchasing US$4.6 billion worth of US equities in July as confidence in the local market weakened. The Kospi remained around 33% below its June peak by the end of the period.
Outlook: Volatility is likely to remain elevated as investors monitor global semiconductor sentiment and evidence that the recent deleveraging cycle has run its course. Despite the sharp correction, continued strength in AI-related memory demand could provide support for South Korea’s heavyweight technology stocks.
