Black Thursday: KOSPI plunges 7% amid AI spending fears

On Thursday, the Korean stock market experienced a significant downturn, with the KOSPI index plummeting 7.57% and the overall market capitalization declining by nearly 400 trillion won, or $297.7 billion. The primary driver behind this decline was investors' apprehensions regarding the long-term viability of artificial intelligence (AI) investments and the future of the semiconductor industry.

By the close of trading, the KOSPI had dropped to 5,554.22 points, marking a 7.57% decline. This sell-off was triggered by a sell-side sidecar at 9:07 a.m., the 27th activation of such a mechanism this year. The situation escalated further with the activation of a Level 1 circuit breaker at 12:38 p.m., following the benchmark index's 8% drop from the previous day's close.

A sell-side sidecar is activated when the most actively traded KOSPI 200 future declines by 5% or more in a single minute, while a Level 1 circuit breaker is set off by a 8% decline within the same timeframe. The exodus of foreign capital was particularly pronounced, with investors offloading 3.6 trillion won worth of shares, extending a streak of eight consecutive trading days marked by net selling.

Despite the bearish sentiment, both institutional and retail investors managed to contribute positively to the market by making net purchases totaling 1.69 trillion won and 1.29 trillion won, respectively. Their actions came in response to the bargain-priced shares that emerged during the intense selling. The heavy selling, however, had a detrimental impact on the performance of major market players. Samsung Electronics, for instance, suffered a 9.48% decline, closing at a lower valuation.