Panic in the AI market spreads, and the Korean stock market's cumulative decline from its high point expands to 20%
South Korean stocks continued to fall as investors reassessed the outlook for demand for artificial intelligence, with the benchmark stock index approaching a technical bear market. The Korea Composite Stock Price Index (Kospi) fell as much as 5.7%, a cumulative decline of about 20% from the all-time high reached last month. Memory chip manufacturer SK Hynix's share price fell by up to 5%, and Samsung Electronics fell by 6.9%. The South Korean stock market was the best-performing major stock market in the world before this year, but the market is highly dependent on the two major chip companies. Once the market sentiment in the chip sector weakens, the market will be easily affected. Leveraged exchange-traded funds, which amplify market fluctuations in both directions, further exacerbated market volatility. Although Samsung Electronics reported a 19-fold surge in quarterly net profit earlier this week, chip stocks continued their decline, highlighting traders' demand for stronger performance support from high valuations in the industry chain. Ian Samson, portfolio manager at Fidelity International, said: "Market volatility has increased significantly, largely due to uncertainty in fundamentals. Artificial intelligence has created a real huge demand for various semiconductors, but this demand is only supported by about $1 trillion in capital expenditures controlled by a few large technology companies." He added that if such chip-related expenditures are unsustainable, the market will face downside risks. In the past few weeks, investors have continued to interpret various developments in the artificial intelligence industry to judge whether this round of rising prices can be sustained, and the South Korea Composite Stock Price Index (Kospi) has fluctuated violently. The index had a cumulative gain of about 116% at its high point during the year. Now the gain has narrowed to about 73%, but it is still the best-performing benchmark stock index in the world.