South Korea’s benchmark KOSPI index recorded its steepest decline since March, plunging more than 8% as investors rushed to reduce exposure to technology and semiconductor stocks amid renewed concerns about global monetary policy and slowing momentum in the AI-driven market rally.

The KOSPI closed at 7,484.41, down 676.18 points, or 8.29%, marking one of the most significant single-session declines of 2026. Trading was temporarily halted after market circuit breakers were triggered during the selloff.

Semiconductor Stocks Lead Losses

Major chipmakers bore the brunt of the decline. Shares of Samsung Electronics and SK Hynix fell sharply as investors reassessed valuations across the semiconductor sector following a broader global technology selloff.

The downturn followed a steep drop in U.S. technology stocks, with the Nasdaq suffering one of its largest point declines on record and the Philadelphia Semiconductor Index posting its worst daily performance since 2020.

Fed Fears Trigger Global Risk-Off Mood

Market sentiment deteriorated after stronger-than-expected U.S. labor data fueled speculation that the Federal Reserve could maintain a tighter monetary stance for longer. Rising rate expectations pressured growth-oriented technology shares worldwide, prompting investors to rotate away from high-valuation sectors.

Asian equities mirrored the weakness seen on Wall Street, with Japan’s Nikkei also posting notable losses as traders reacted to growing concerns over liquidity conditions and elevated market valuations.

AI Rally Faces Reality Check

The KOSPI had been among Asia’s strongest-performing indexes this year, driven largely by enthusiasm surrounding artificial intelligence infrastructure and memory-chip demand. However, analysts noted that the market’s heavy dependence on a handful of semiconductor giants increased vulnerability to sharp corrections.

Despite the selloff, the index remains significantly higher year-to-date, highlighting the scale of gains accumulated during the AI-fueled rally.

What Traders Are Watching

Investors are now monitoring upcoming U.S. inflation data, Federal Reserve commentary, and earnings guidance from major semiconductor companies for clues about whether the current correction will deepen or stabilize. Continued volatility in global technology shares is likely to remain a key driver for Asian markets in the near term.

As markets digest shifting expectations around interest rates and AI-sector valuations, the KOSPI’s sharp decline serves as a reminder that even the strongest rallies can face sudden reversals when sentiment changes.

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