Tech stocks plunged globally on concerns that rising US inflation will force interest rate increases, intensifying pressure on an AI sector already burdened by heavy debt.
South Korea's Kospi 200 index, weighted heavily toward memory chip makers, fell more than 8% overnight and hit a six-month closing low, according to The Guardian. Trading halted multiple times as circuit breakers engaged.
The sell-off extended to major tech investors. Samsung and SoftBank shares dropped as traders reassessed valuations in a higher-rate environment. The Guardian reports that fears over inflation and potential interest rate hikes spooked markets already wary of the "heavily indebted sector," referring to AI-linked companies.
The timing reflects twin pressures. Inflation data released in September triggered renewed concern about central bank action. Meanwhile, the AI investment boom has left many companies carrying substantial debt loads that become more expensive to service if borrowing costs rise. Traders began repricing these risks simultaneously, The Guardian reports, triggering the acceleration in selling.
The Kospi's sharp decline signals particular vulnerability in South Korea, where Samsung and other chip makers dominate market indices and global supply chains. A prolonged tech downturn there ripples through semiconductor supply to downstream manufacturers worldwide.
The Guardian notes this represents an "accelerating" sell-off of AI-linked shares, suggesting momentum in the downward direction. Whether the decline stabilizes or deepens will depend partly on whether inflation data continues to point toward rate hikes and how markets reassess the profitability of AI investments under higher-cost-of-capital scenarios.