South Korea's KOSPI Plunges 10%, Triggers Circuit Breaker in Tech-Led Asia Sell-Off

South Korea's benchmark KOSPI index suffered its worst single-day drop in years on Tuesday, plunging 9.99% to close at 8,203.84, triggering a market-wide circuit breaker as investors fled semiconductor and technology stocks amid renewed concerns over artificial intelligence (AI) infrastructure costs.

The sell-off, which wiped out nearly 10% of the index's value, was led by a sharp decline in chipmaking giants Samsung Electronics and SK Hynix, both of which fell more than 12%. Other major stocks, including Hyundai Motor, KIA, and LG Electronics, also suffered heavy losses, with Hyundai Motor dropping 12.05%. The broader downturn extended to the junior KOSDAQ index, which tumbled 7.94% to finish at 891.52.

Trading halts and sidecars were activated multiple times during the session. A sidecar was triggered in the morning when KOSPI futures fell 5% for at least one minute, prompting a five-minute pause in program trading. Later, a Level 1 circuit breaker halted all trading for 20 minutes after the index sustained a drop exceeding 8% for more than one minute. Retail investors stepped in as bargain hunters, but foreign and institutional investors were net sellers, with foreign investors dumping a net 2.8 trillion won (approximately US$1.82 billion) worth of shares.

The rout was sparked by a tech-led sell-off on Wall Street, where the Nasdaq fell over 1%, driven by sharp declines in major AI-related stocks such as Nvidia, Amazon, and Microsoft. Investors are increasingly questioning the vast capital expenditures required for AI infrastructure with little immediate return. The pressure was compounded by SpaceX's plan to issue corporate bonds and reports that the Korean Financial Services Commission had acknowledged rushing to approve leveraged investment products linked to chipmakers.

The sell-off rippled across Asian markets. Tokyo's Nikkei 225 fell 3.6%, with SoftBank dropping over 10% and Tokyo Electron losing 6.2%. Hong Kong's Hang Seng Index sank more than 2%, while Shanghai, Taipei, Sydney, and Singapore also suffered strong selling pressure. European markets opened lower as well.

In currency markets, the South Korean won weakened 0.31% against the US dollar, trading at 1,539.1 won per dollar by the daytime close. Finance Minister Koo Yun-Cheol commented that the current exchange rate does not reflect the country's economic fundamentals. Oil prices also fell more than 1%, extending Monday's decline amid optimism over Iran-US peace talks and a temporary lifting of sanctions on Iran's crude exports.