South Korean shares sink 6% on AI spending concerns, oil spike

South Korean shares tumbled 6% on Friday on concerns over the sustainability of heavy AI spending by major US technology firms, while a surge in oil prices above $100 a barrel rekindled fears of a fresh inflation shock.

The benchmark KOSPI was down 6.3% at 6,650.41 points, as of 0431 GMT, erasing most gains from the previous three sessions when the index climbed roughly 9%.

The sharp decline, the biggest in five days, triggered “sidecar” trading curbs on the KOSPI and the junior Kosdaq index , temporarily halting programme trading.

It was the 13th sidecar activation on the KOSPI in 17 sessions this month.

Foreign investors turned net sellers, offloading shares worth 2.62 trillion won ($1.79 billion) on the day, after buying a net 5.57 trillion won over the previous four sessions, exchange data showed.

Alphabet’s cash burn and hefty AI spending plans stoked concerns that returns may lag the sector’s heavy outlays, raising fears that more disciplined spending could slow demand for AI chips and dampen earnings outlook for Asian chipmakers.

Semiconductor companies in South Korea have been the biggest beneficiaries of the global AI trade, leaving them vulnerable to “any sign that the pace of AI spending could moderate,” said Billy Leung, investment strategist, Global X ETFs Australia.

“Even though we have not yet seen clear evidence of major customers cutting spending, concerns about a slower pace of future AI infrastructure investment are weighing on sentiment toward Korean memory names such as SK Hynix and Samsung Electronics.”

Earnings reports next week from four of the “Magnificent 7” companies: Apple, Microsoft, Meta, and Amazon will be a litmus test for the global AI trade.

SK Hynix, the world’s top memory chipmaker, and rival Samsung Electronics tumbled more than 8% each.

The two stocks account for more than half of the benchmark KOSPI gauge.

South Korea’s financial regulator brought forward stricter requirements for retail investors trading single-stock leveraged ETFs, the most popular of which are tied to the two chipmakers, to July 31 to curb sharp market gyrations.

Risk sentiment was further sapped by Brent crude’s climb back above $100 a barrel on tensions in the Middle East and US President Donald Trump imposing new tariffs of 10% and 12.5% on goods from 60 trading partners, including South Korea.

Meanwhile, the won crept higher to a near 11-week high of 1,462.2 per dollar on the onshore settlement platform.

The currency has firmed more than 6% this month, but remains 1.8% weaker against the dollar for the year.

South Korea’s finance ministry said the US Treasury’s latest currency report reaffirmed an earlier view expressed by them that excessive, one-sided depreciation of the Korean won is unwarranted.