South Korea's benchmark KOSPI suffered a brutal selloff on Monday, plunging 9%, as investors slammed the brakes on the market's red-hot artificial intelligence rally, exposing just how heavily the index had become dependent on a handful of semiconductor stocks.
The benchmark is now down about 14% from the record high it touched last week. Heavyweights and semiconductor giants bore the brunt of the selling. Samsung shares tumbled over 6%, while SK Hynix cracked over 4% on Monday.
As investors began locking in profits, the market's concentration risk came into sharp focus. Too much of the KOSPI's momentum had become tied to the performance of a small group of AI-linked stocks, leaving the broader market vulnerable to any reversal in sentiment.
Samsung Electronics and SK Hynix together account for nearly half of the KOSPI's weighting and have contributed roughly two-thirds of the benchmark's gains this year. Even after Monday's selloff, the two stocks remain up 138% and 196%, respectively, on a year-to-date basis.
The sharp reversal comes after a remarkable run for South Korean equities. The KOSPI has been among the world's best-performing stock indexes this year, powered largely by an AI-driven surge in semiconductor shares. To put things in perspective, KOSPI is up a staggering 79% in 2026.
Demand for AI infrastructure has exploded over the past year as technology companies worldwide race to build advanced AI models and expand computing capacity. The boom triggered a wave of orders for high-bandwidth memory chips, prompting investors to aggressively pile into Korean chipmakers that stand at the centre of the global AI supply chain.
Rising geopolitical tensions after fresh Israeli strikes on Lebanon, which pushed oil prices and the U.S. dollar higher, further dampened risk appetite across Asian markets.
Geopolitical tensions intensified after Israel carried out fresh strikes on Lebanon on Sunday despite an existing ceasefire between the two countries. The renewed escalation pushed oil prices up by more than $2 a barrel on Monday and raised fresh concerns over the broader regional conflict and the resumption of crude shipments through the Strait of Hormuz.
The combination of profit-booking in AI winners, extreme index concentration and growing geopolitical uncertainty created the perfect storm for the KOSPI, turning one of this year's strongest equity markets into one of Monday's biggest casualties.
