Full Breakdown
South Korean Chip Stocks Plunge Amid AI-Driven Hype, Earnings Miss and Leveraged Trading
7/29/2026, 2:07:15 PM
Core Event
On July 29, South Korea’s KOSPI index fell 6 % after intraday drops of up to 12.6 %. The rout was led by memory-chip makers SK Hynix and Samsung Electronics, which together account for more than half of the KOSPI’s market value. SK Hynix shares dropped 9.6 % after a record-quarter profit surge missed forecasts, while Samsung slid as much as 14 % before trimming losses to 5.2 %. A 20-minute circuit-breaker was triggered for the second straight day.
Background & Context
The decline follows a rapid rally earlier in the year as investors poured capital into AI data-center projects, betting on demand for high-bandwidth memory (HBM). Concerns have risen about:
- China’s emerging chip-making equipment – progress in domestic deep-ultraviolet (DUV) tools could pressure global leaders.
- Leveraged retail trading – many small investors used single-stock leveraged ETFs to amplify exposure to AI-related equities, now under regulatory review.
- AI-spending uncertainty – data-center capacity may exceed near-term demand, creating “circular funding” where AI firms finance each other’s growth.
Data & Statistics
- SK Hynix reported a 557 % year-on-year rise in operating profit and a 257 % jump in revenue to 79.32 trillion won, yet missed LSEG SmartEstimates (expected 84 trillion won revenue).
- The AI correction erased about $2.18 trillion from Seoul’s equity market, wiping roughly 40 % of the KOSPI’s value from its peak a month earlier.
- Retail investors sold a net 2 trillion won (? $1.4 billion) of KOSPI stocks on the day, outpacing foreign outflows.
Official Statements & Responses
Jung In Yun, the finance minister, said: “The most immediate possibility would be to deploy the market stabilization fund, encourage institutional investors such as the National Pension Service to rebalance into domestic equities, and provide liquidity through state-backed institutions.”
On-the-Ground Reports
Retail sentiment turned sharply negative. Kim Beom-jin, a Seoul-based individual investor, told Bloomberg, “I’ve just been to hell.” Fund manager Yoon Joonwon of DS Asset Management observed, “People seem to be just running away,” describing the sell-off as “irrational selling” driven by leverage.
Conflicting Reports & Gaps
Sources differ on the magnitude of SK Hynix’s intraday decline: CNBC reported a 15 % slide in U.S. trading, Bloomberg noted a 20 % morning plunge, while Reuters recorded a nearly 20 % drop before a partial recovery to 9.6 % closing loss.
Verbatim Quotes
- “The most immediate possibility would be to deploy the market stabilization fund, encourage institutional investors such as the National Pension Service to rebalance into domestic equities, and provide liquidity through state-backed institutions,” — Jung In Yun, finance minister
- “It's certainly a very crowded trade which is being unwound,” — Frank Benzimra, head of Asia equity strategy at Societe Generale
What’s Next
The finance ministry will review regulations governing leveraged ETFs and consider activation of the market-stabilisation fund. Investors await Samsung Electronics’ earnings report slated for Thursday, while U.S. chip makers such as Nvidia and AMD are expected to release results later in the week, which could further influence sentiment toward AI-related equities.
