South Korea’s Kospi index drops 4% on AI bubble fears

SEOUL: South Korea’s benchmark Kospi index dropped more than four percent Wednesday on fears of overheated artificial intelligence valuations, with chip giants Samsung and SK hynix each losing over five percent.

The Kospi index was trading down 4.48 percent at 3,937 points, following a downbeat session on Wall Street, as speculation mounts that a recent tech rally may have gone too far and a painful correction could be on the way.

Japanese stocks are also falling on fears of excessive tech valuation, with the Nikkei index down 2.53 percent.

Shares in Samsung Electronics and SK hynix, two of the world’s leading memory chip makers, fell more than 5 percent in the first hour of trading on Wednesday.

Samsung’s stock has surged more than 85 percent since the start of the year, buoyed by the AI-driven market, even after accounting for Wednesday’s sharp drop.

South Korean President Lee Jae Myung pledged on Tuesday to “significantly expand investment to usher in the ‘AI era’”, tripling spending in the sector next year.

The declines in Seoul and Tokyo follow a global sell-off on Tuesday as investors weighed Wall Street’s recent tech rally against mounting fears of an AI bubble.

A flood of multibillion-dollar investment into AI has been a key driver of the surge in mostly technology equities across the globe this year, sending valuations to record highs.

But there is increasing speculation that tech-led gains may have gone too far and a painful correction could be on the way.