KOSPI Plunges 3% on Doubts Over AI Returns

Doubts in the market about the profitability of AI investments spread to the Korean stock market, with the KOSPI closing at 5,730.74, down 3.48% from the previous trading day, marking a second straight day of losses. The index fell more than 5% intraday, breaking below 5,600, and a sell-side sidecar — a mechanism that briefly halts program buying to curb a rush of sell orders when the index plunges — was triggered for the first time in 11 trading sessions.

The immediate trigger for the market decline was the earnings reports from U.S. big tech companies. Alphabet, Google's parent company, saw its shares tumble more than 12% after its search ad revenue fell short of market expectations and its AI investment costs rose sharply. The company lost about 670 trillion won in market capitalization in a single day.

This downward momentum carried over to Korea's large-cap semiconductor stocks. As concerns spread that reduced spending by big tech could lead to fewer semiconductor orders, SK Hynix fell more than 7% and Samsung Electronics more than 3%.

"Concerns over the profitability of AI investments were the biggest driver of today's plunge," said Park Sang-hyun, a researcher at iM Securities, while noting that "looking at the earnings reports and guidance so far, there is no sign yet of a sharp pullback in capital spending."

The KOSDAQ also closed down 3.83% at 724.38 the same day.