South Korean stocks came under renewed pressure on Wednesday as semiconductor shares resumed their decline and investor sentiment weakened after a U.S. strike on Iran. The selloff also highlighted growing concerns over the market's heavy dependence on a small group of chipmakers that have driven this year's artificial intelligence-fuelled rally.
The benchmark KOSPI fell as much as 3.6% in morning trade, a day after surging 8.2%. The sharp move followed Monday's 8.3% slump, which was severe enough to trigger a 20-minute halt in spot market trading.
Large swings have become a recurring feature of the market as Samsung Electronics Co. and SK Hynix Inc., which together make up more than half of the index, remain at the centre of volatility surrounding AI-linked stocks. The two tumbled 5% each in today’s session.
The pullback comes after a stellar run for South Korean equities. The KOSPI has emerged as one of the world's top-performing stock indexes this year, largely driven by the surge in semiconductor stocks linked to the artificial intelligence boom. The benchmark is up 79% so far in 2026.
Demand for AI infrastructure has surged over the past year as technology companies worldwide race to develop advanced AI models and expand computing capacity. That trend has fuelled strong demand for high-bandwidth memory chips, prompting investors to pour money into South Korean chipmakers that occupy a key position in the global AI supply chain.
At the same time, rising geopolitical tensions following fresh US strikes on Iran weighed on risk appetite across Asian markets, while pushing oil prices and the U.S. dollar higher.
The latest escalation lifted oil prices by more than $1 a barrel on Tuesday and renewed concerns about the broader regional conflict, as well as the prospects for the resumption of crude shipments through the Strait of Hormuz.
AI and semiconductor stocks, the undisputed market darlings of 2025 and 2026, have suddenly come under pressure as concerns grow that the rally may have run ahead of fundamentals. The pain has been especially visible in markets most exposed to the AI supply chain like Korea, whose benchmark Kospi has declined 13% from its recent record high in recent sessions.
Market fluctuations have been amplified by the growing popularity of leveraged exchange-traded funds tied to the two chipmakers. These products magnify daily market moves, contributing to a surge in volatility. The KOSPI 200 volatility gauge climbed above 90 for the first time on Tuesday, setting a new record.
Investors are also awaiting Wednesday's U.S. inflation data, which could offer fresh clues on the outlook for interest rates and whether borrowing costs may remain elevated for longer.
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