Key Takeaways
- South Korea’s benchmark KOSPI index plunged over 6% at Thursday’s opening bell, activating automatic circuit breakers that paused trading for five minutes.
- Major memory chipmakers Samsung Electronics and SK Hynix experienced approximately 10% losses following news that new AI software developments might diminish semiconductor demand.
- Japanese semiconductor manufacturer Kioxia suffered losses exceeding 15%, contributing to a 2%+ decline in the Nikkei 225 index.
- Investment research firm Morningstar increased fair value projections for both Samsung and SK Hynix, pointing to robust AI sector demand and constrained supply conditions.
- Industry analysts predict a significant expansion in memory chip production capacity over the coming two years, potentially triggering a market correction in 2029-2030.
Trading on South Korea’s primary stock exchange came to an abrupt halt Thursday morning as semiconductor stocks experienced dramatic losses, activating automatic trading suspension mechanisms. The decline rippled throughout Asian markets, impacting prominent chip manufacturers in Japan and beyond.
The Catalyst Behind the Semiconductor Selloff
The KOSPI index tumbled more than 6% immediately following the opening bell, triggering a sell-side circuit breaker mechanism that imposed a five-minute trading freeze. Samsung Electronics shares declined 7.3%, while SK Hynix witnessed losses approaching 9%.
The dramatic price movement followed publication of a report by The Information revealing that OpenAI has engineered new software capabilities that could potentially reduce AI inference computational demands by half. This development sparked concerns across the investment community that technology companies may require significantly fewer processors to operate their artificial intelligence systems.
Additional reports indicating Meta Platforms intends to liquidate surplus cloud infrastructure capacity further rattled market participants. The implication suggests enterprises could maximize utilization of current hardware resources rather than procuring additional semiconductor components.
Separate reports emerged suggesting Apple has initiated discussions to source memory semiconductors from sanctioned Chinese manufacturers, creating additional competitive pressure on established chip suppliers.
Notwithstanding Thursday’s steep decline, SK Hynix has still accumulated gains exceeding 200% year-to-date. Kioxia, Japan’s highest market capitalization company, has surged approximately 600%. The KOSPI index itself has climbed nearly 83% throughout 2026.
IG markets analyst Fabien Yip identified profit-taking activities as a primary contributing factor behind Thursday’s market movement.
Industry Expert Perspectives
Contradicting Thursday’s market turbulence, Morningstar elevated its fair value assessments for both Samsung and SK Hynix just one day earlier on Wednesday.
Morningstar equity analyst Jing Jie Yu characterized the present memory chip expansion cycle as “tracking substantially stronger than expected,” attributing this strength to constrained supply conditions, persistent AI sector demand, and extended supply commitments.
However, Yu also identified a potential long-term challenge. The analyst anticipates that substantial increases in memory manufacturing capacity during the next 24 months will likely precipitate a market downturn between 2029 and 2030, coinciding with the expiration of extended pricing contracts.
Thursday’s trading suspension represents the latest in multiple circuit breaker activations on the KOSPI throughout 2026. Dominant semiconductor equities have generated substantial intraday price fluctuations in the index consistently this year.
Yip noted expectations for heightened volatility ahead of Thursday’s release of the US nonfarm payrolls employment data. He additionally highlighted that speculative short positions against the Japanese yen have returned to levels last observed in July 2024, a period that previously catalyzed a dramatic unwinding of carry-trade strategies.
While artificial intelligence demand maintains current strength, investors increasingly question the sustainability of prevailing semiconductor pricing dynamics.
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