Kospi Falls Over 5% as Chip Stocks Slide on AI Spending Concerns

Key Takeaways

• South Korea’s Kospi dropped more than 5% intraday on November 5 as semiconductor shares led a sharp selloff.
• Heavy foreign selling accompanied the decline, while temporary restrictions on program sell orders were triggered on both the Kospi and Kosdaq.
• Concerns about possible US scrutiny of AI infrastructure added to uncertainty over chip demand, although corporate results showed contrasting trends.

Semiconductor Selling Drags the Kospi Lower

South Korea’s Kospi fell more than 5% during Thursday’s trading session as investors reduced exposure to semiconductor companies amid uncertainty over artificial intelligence investment and US policy.

The index opened at 5,580.09, down 1.82% from the previous close, before falling as low as 5,386.29 in morning trading. That represented an intraday decline of 5.23%, rather than a confirmed closing result.

Samsung Electronics and SK hynix were among the main sources of pressure. Their weakness followed an overnight decline of more than 3% in the Philadelphia Semiconductor Index, despite gains in broader US equity benchmarks.

The divergence placed South Korea’s technology exposure in focus. Investors were reassessing the earnings outlook for companies linked to AI infrastructure even as other parts of the equity market responded more positively to the US election outcome.

Foreign Selling Accompanies Trading Curbs

Foreign investors sold a net 1.13 trillion won of Kospi shares by 10:39 a.m. Korea time. Later midday reporting put foreign selling above 1.4 trillion won, indicating that overseas investors continued reducing exposure as the session progressed.

Those totals represent intraday snapshots and should not be treated as the final foreign-flow figure for November 5.

The Korea Exchange activated a sell-side sidecar on the Kospi market at 10:16 a.m. A similar restriction was also triggered on the Kosdaq as the smaller-company index fell below 700.

Under the Kospi mechanism, a decline of at least 5% in the relevant futures contract that persists for one minute triggers a five-minute suspension of the effectiveness of program sell orders.

The measure temporarily restricts a category of automated selling. It does not suspend all share trading or establish that a market bottom has been reached.

Its activation highlighted the speed of the move and the pressure spilling between futures and underlying equities.

Why US AI Policy Concerns Matter to Korean Stocks

The selloff came as investors considered whether Democratic gains in the US midterm elections could lead to greater scrutiny of AI infrastructure development.

Market concerns centred on potential oversight of data centres, including their electricity requirements, water consumption and environmental impact. More demanding approval processes could lengthen construction schedules and change the timing of equipment purchases.

These were expectations about possible policy changes. The reporting reviewed did not establish a newly enacted nationwide restriction on AI data-centre construction.

The distinction matters because share prices can react to a perceived change in future earnings before legislation, permitting rules or investment budgets actually change.

For Korean chip suppliers, the potential transmission runs through customer spending. If data-centre projects take longer to complete, associated orders for memory, components and equipment could be pushed into later periods.

A delay would not necessarily eliminate the underlying demand. However, it could affect near-term revenue expectations and the valuations investors are prepared to assign to anticipated growth.

Thursday’s trading suggested that investors were placing greater weight on those timing risks.

Qualcomm Results Add to Handset Demand Questions

Qualcomm’s fiscal fourth-quarter results added another concern for semiconductor investors: the health of smartphone-related demand.

The company reported handset revenue of $5.137 billion, down 26% from a year earlier. Total quarterly GAAP revenue fell 8% to $10.322 billion.

Qualcomm also highlighted broader semiconductor input-cost increases, including costs associated with memory, wafer fabrication and advanced packaging. It said pricing actions were expected to deliver their full benefit to QCT gross margins in the second half of fiscal 2027.

The figures illustrated a challenge across the chip supply chain. Higher component prices can support some suppliers’ revenues while increasing costs for manufacturers that incorporate those components into finished devices.

That creates scope for different outcomes across memory producers, chip designers and smartphone makers. A deterioration in one company’s handset business should therefore be assessed alongside its customer exposure and product mix.

Arm’s Growth Provides a Counterweight

Arm’s latest results offered evidence that demand remained strong in parts of the semiconductor industry.

The company reported fiscal second-quarter revenue of $1.44 billion, up 27% year over year. Licensing and other revenue increased 50% to $773 million, while royalty revenue reached $670 million.

Arm also said data-centre royalties doubled from a year earlier.

Those results complicate a uniformly negative interpretation of the sector. Strong growth in data-centre computing can coexist with weaker handset sales and concerns about the timing of future infrastructure projects.

For investors assessing Korean technology shares, the relevant issue is how each company’s earnings depend on those separate markets. Quarterly results, customer commitments and delivery schedules provide a firmer basis for that assessment than treating every semiconductor business as having the same exposure.

What Could Shape the Next Move?

Foreign-investor flows, the performance of Samsung Electronics and SK hynix, and subsequent trading in US chip stocks are likely to remain central to near-term sentiment.

More concrete information on data-centre permitting and customer capital expenditure would help establish whether the policy concerns translate into changes in spending.

Continued investment commitments and firm order books could ease concerns about demand being postponed. Project delays, weaker purchasing plans or further pressure on device manufacturers would reinforce the risks investors were pricing into Thursday’s session.

The Kospi’s decline reflected a combination of heavy selling, semiconductor weakness and uncertainty about future AI infrastructure spending. Whether that pressure persists will depend on how actual orders and earnings develop alongside the policy debate.

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