On the 23rd, foreign media reports pointed to a "shock from Korea" as the reason the U.S. Nasdaq index plunged more than 2%. With concerns mounting over overheated AI investment and overvaluation, the sharp drop in Korea's stock market acted as a trigger, sparking a global sell-off in tech stocks.
The previous day, the KOSPI index plunged 10% on a steep drop in Samsung Electronics and SK hynix. After Korea's market closed, European and U.S. markets, which opened later, also fell, led by tech stocks. Typically, Korea's stock market is influenced by movements in the U.S. market the night before, but as domestic semiconductor stocks drew in global funds and swung unusually this year, an odd phenomenon unfolded in which the flow of Korea's market instead transmitted shock to the U.S. market.
Japan's economic daily Nihon Keizai Shimbun said on the 24th that concerns about Korea's semiconductor cycle lay behind the sharp drops in the U.S. Nasdaq Composite and the Philadelphia Semiconductor Index. The paper noted in particular that reports of delays in SK hynix's transition to producing cutting-edge memory stoked worries about slowing AI demand and chilled investor sentiment.
ChosunBiz reported on the 23rd, before our stock market opened, that "SK hynix is delaying the conversion of some fifth-generation HBM (HBM3E) production lines that had initially been slated to switch to HBM4." It said SK hynix is adjusting the pace of its expansion of mass production of sixth-generation high-bandwidth memory (HBM4) to respond to a severe shortage of commodity DRAM supply.
(Related article: SK hynix moderates HBM4 production speed… seeks additional revenue by increasing "short-supply" commodity DRAM)
After the report, concerns spread in the market about a slowdown in the AI investment cycle and the theory that HBM demand had peaked. And the unease that began in Korea's stock market appeared to spread in succession to Japan, Europe and the United States.
Bloomberg also pointed to Korea as the epicenter of the global tech sell-off that day. Bloomberg said, "Warnings about tech overheating are not new, but the decline on the 23rd was triggered as volatility exploded in Korea's market, which has posted the world's best returns this year."
In particular, Bloomberg said single-stock leveraged exchange-traded funds (ETFs) tracking Samsung Electronics and SK hynix dumped large sell orders during the decline, deepening losses. The outlet described it as a classic "tail wagging the dog" situation in which leverage within the stock market creates risk. Normally, ETF prices should move according to stock prices, but instead ETF trading shook the share prices of the underlying stocks.
Reuters likewise cited the plunge in Korea's stock market as one of the main catalysts for the global tech sell-off. Reuters said that on the 23rd, when the KOSPI plunged 10%, the Seoul market served as a leading signal for a sell-off in global semiconductor stocks. The Wall Street Journal (WSJ) said, "The sell-off that began in Asian markets intensified as Samsung Electronics and SK hynix each fell around 12% in Korea's market."
After our market plunged on the 23rd, the Nasdaq Composite fell 2.22%, and the Philadelphia Semiconductor Index, concentrated in AI Semiconductor stocks, tumbled 7.6%. Shares of U.S. memory chipmaker Micron also fell 13.2%, and major semiconductor corporations including Qualcomm (-8.0%), Intel (-6.1%) and AMD (-6.0%) slumped across the board.