Samsung plunges 10%, dragging Kospi down 8% in tech rout

The Kospi tumbled over 8% on Tuesday after Samsung Electronics plunged nearly 10%, as investors shrugged off a 19-fold profit surge to take profits in AI-linked stocks.

"The memory cycle is still strong, but the market is starting to ask whether the easy part of the trade is already behind us," said Charu Chanana, chief investment strategist at Saxo.

Samsung forecast second-quarter operating profit of 89.4 trillion won ($58.7 billion), nearly 19 times higher than a year earlier and ahead of analysts' expectations. Revenue is expected to more than double to 171 trillion won. Rival SK Hynix nosedived over 11% as the selloff swept across the semiconductor sector.

The selloff highlights a growing tension in AI-exposed equities, where even blowout results fail to satisfy a market that has priced in perfection. James Thorne, chief market strategist at Wellington-Altus, said the AI trade has become a victim of its own popularity. "That is what happens when a bottleneck trade gets crowded: fundamentals stay strong, but earnings stop impressing because perfection was already priced in," he wrote on X. Thorne said the next phase of the AI buildout could reward power, grid capacity, cooling and physical infrastructure rather than chipmakers.

The tech rout was compounded by a separate geopolitical catalyst. Crude oil prices strengthened after attacks on ships in the Persian Gulf, threatening supply routes through one of the world's most critical energy chokepoints. The dual shocks — a tech-led equity selloff and rising oil prices — raised concerns about inflation pressures just as central banks assess the next phase of monetary policy.

The Kospi's decline marked its worst session in years, with Samsung's drop alone accounting for a significant portion of the index's loss. The selloff in Seoul tracked a broader reassessment of AI-exposed stocks globally, where investors have begun questioning whether the semiconductor cycle has peaked. Nvidia CEO Jensen Huang acknowledged the dynamic in November, telling employees that strong results fuel the AI bubble narrative while weak results prove it.

This article is for informational purposes only and does not constitute investment advice.