KOSPI Plummets 4.4% Amid 'AI Shock' from China and Peak Semiconductor Concerns

[Anchor]

The KOSPI has experienced another sharp decline. The market was rattled by concerns that the high-performance AI model Kimi K3, developed by a Chinese startup, could reduce the need for semiconductors.

Reporter Lee Tae-gwon has the story.

[Reporter]

With the 38th sidecar of the year triggered, the KOSPI closed down 4.4% at 6,516.

The index has returned to the level it was at three months ago.

Leading the downturn were concerns over a peak in the semiconductor market that swept through the U.S. stock market during the Constitution Day holiday.

Taiwanese semiconductor foundry TSMC announced strong second-quarter earnings and plans to increase its capital expenditure, which the market interpreted as an expansion of supply.

[Lee Kyung-min / Researcher at Daishin Securities: (TSMC's) plan to expand investment is being interpreted as: if supply increases, prices will fall and earnings will decline. There is a sense that such trends might be returning....]

The AI model Kimi K3, released for free by the Chinese startup Moonshot, also shocked the market.

It has been evaluated as delivering performance close to the top-tier models from U.S.-based OpenAI and Anthropic at a relatively lower cost.

Just as when China's AI company DeepSeek appeared last year and Google's TurboQuant this year, fears that semiconductor demand would decrease have gripped the market.

[Kim Jae-seung / Researcher at Hyundai Motor Securities: Since it has become clear that China is doing well even with frontier models, concerns are growing that big tech companies might not be able to generate the massive cash flow they have been creating until now.]

However, some analysts suggest that investment demand could actually increase.

[Hwang Soo-wook / Researcher at Meritz Securities: (Chinese AI) high-performance models will ultimately require U.S.-made, premium-line AI GPU server racks....]

Amid the high volatility of the KOSPI, trading of single-stock leveraged ETFs, which has been cited as a factor in increasing volatility, actually rose by 159 billion won to maintain the 12 trillion won level, despite the authorities' announcement of supplementary measures on July 16.

The market is paying the closest attention to the scale of capital expenditure in the earnings reports of major big tech companies, starting with Google's Alphabet this Thursday.

(Video reporting: Shin Jin-soo, Video editing: Park Na-young, Graphics: Kim Ye-ji)
※ Please note: This article was translated by AI and may contain errors.