KOSPI Drops Another 5% as AI Selloff Deepens in Seoul

South Korea's KOSPI crashed another 5% on Monday as the global AI selloff deepened, and the index's AI bellwether stock has now fallen more than 40% from its peak, The Economic Times reported.

That is the number that matters. Not a drift, not a correction at the margins — a fifth of value gone in a single session, on top of weeks of pressure on the chipmakers and memory suppliers that anchor Asia's fourth-largest equity market.

The rout in Seoul is the AI trade unwinding in real time. For two years, investors priced Korean semiconductor names as a near-pure play on the buildout of AI datacenters — memory, high-bandwidth silicon, the picks and shovels of the model boom. Now the same concentration that lifted the KOSPI is dragging it down.

How bad is the damage?

Two figures frame the day:

• The KOSPI fell roughly 5% in the latest session, its second heavy drop in the current rout.
• The market's AI bellwether — the chip stock investors watch as a proxy for the entire AI supply chain — is down more than 40% from its record high.

A 40% drawdown crosses a technical threshold that traders rarely ignore. Markets class a 20% decline from peak as a bear market for an individual stock. Double that, and the conversation changes: analysts stop asking whether the dip is buyable and start asking what the peak pricing assumed that current pricing no longer does.

For Korea, the swing is systemic. The KOSPI is heavily weighted toward semiconductors, which means a single sector's narrative effectively sets the national benchmark's direction. When AI capex expectations soften, the index has little else to absorb the blow.

Why is the AI trade cracking now?

The selloff in Seoul mirrors a broader rout across AI-exposed equities, as The Economic Times notes in labeling the episode an "AI rout" that is deepening rather than stabilizing. Investor anxiety has centered on whether the enormous capital spending on AI infrastructure will translate into proportional returns — a question that hangs over every chip supplier, memory maker and equipment vendor in the chain.

Korea sits early in that chain. Its chipmakers ship into datacenter buildouts months before end-demand shows up in anyone's revenue. That makes their stocks a leading indicator of how the market reads AI demand — and right now, the read is deteriorating fast. A bellwether down 40%-plus from its peak is the market pricing in a meaningful downgrade of expectations, not a routine wobble.

The speed compounds the problem. A second 5% single-day drop forces margin calls, triggers stop-loss selling and pushes passive funds to rebalance away from the very names that once led the index. Selling begets selling.

What comes next for Korean chip stocks?

The immediate question is whether the bellwether's 40% decline marks capitulation or a waypoint. Historically, drawdowns of that magnitude in cyclical semiconductor names resolve only when a fundamental datapoint — a guidance cut, a capex commitment from a hyperscaler, a memory price inflection — resets the narrative in either direction.

For now, the market has rendered its verdict on the AI premium: a 5% daily drop in Seoul and a bellwether more than 40% below its peak. Whether that verdict holds will depend on the next round of AI infrastructure spending signals — and on whether Korea's chip sector can show that demand, not just sentiment, has found a floor.