South Korea Stock Market Plunges Nearly 20%, Approaching Bear Market Territory, AI Craze Encounters Awkward Situation of "The Worse the Performance, the Sharper the Drop"

BlockBeats News, July 8th: Wednesday afternoon, the South Korean stock market saw a further decline as investors reassessed the outlook for AI demand. The KOSPI index fell by over 6% at one point, dropping below 7200 points, marking a cumulative decline of over 20% from last month's all-time high and potentially entering a technical bear market.

Storage chip manufacturer SK Hynix saw a 5% decline, while Samsung Electronics dropped by 6.9%. The Korea Exchange triggered a "circuit breaker" on the KOSPI index, halting program trading. The South Korean stock market had been one of the best-performing markets globally this year, but its performance heavily relied on SK Hynix and Samsung Electronics. As sentiment in these sectors weakened, the volatility amplified. Despite Samsung Electronics reporting a 19-fold increase in quarterly profit earlier this week, chip stocks remain under pressure.

Jordan Klein, TMT sector expert at Mizuho Securities, stated that investors' reaction to Samsung's preliminary second-quarter performance was excessive. He believed that the semiconductor sector's current selloff was more indicative of momentum easing rather than fundamental deterioration. Klein mentioned that excluding one-time bonus expenses, Samsung's operating profit significantly exceeded expectations, with the implied operating profit margin in its memory business potentially exceeding 80%. He noted that Samsung's single-quarter operating profit had surpassed the sum of the past three years, deeming the stock price reaction to preliminary results as "extremely short-sighted."

Meanwhile, an AI trading rotation emerged in the Asian markets. Chinese stocks listed in Hong Kong surged, with the Hang Seng China Enterprises Index rising by 3.4% at one point. The Hang Seng Tech Index soared by over 5%, Alibaba jumped by over 8%, and Tencent rose by over 3%. Market participants believe that funds are shifting from crowded trades focusing on AI infrastructure to markets with lower valuations and more value-oriented characteristics. Reports from Reuters about DeepSeek's self-developed chip and The Information about Smart Spectrum AI considering designing its own AI chip further fueled this rotation. (Jinse)