KOSPI Plunges 7.9% on Meta-Fueled AI Spending Fears; Brokerages Urge Dip Buying

KOSPI slides to the 7,600 level after a 7.9% plunge; Kosdaq drops 6.7%

Sell sidecars triggered on both KOSPI and Kosdaq

Samsung Electronics dives more than 9%; SK Hynix tumbles more than 14%

South Korea’s two main stock markets were hit by another bout of sharp volatility on July 2 as controversy over possible overinvestment linked to Meta triggered sell sidecars — a temporary halt of program sell orders — on both markets, deepening investor चिंता over what could trigger the next leg lower.

Brokerages said the recent roller-coaster ride in local equities has steadily worn down investors’ patience with semiconductor shares. Still, they said solid earnings make the current weakness a valid buying opportunity.

According to the Korea Exchange, the KOSPI closed down 7.89% and the Kosdaq fell 6.74% on July 2. Both markets triggered sell sidecars during the session as losses accelerated. That was the 15th such trigger this year for the KOSPI and the sixth for the Kosdaq. For the KOSPI alone, it was the 30th sidecar activation this year.

The drop was sparked by a selloff in US semiconductor stocks. Earlier on July 2, New York equities fell broadly as chipmakers came under heavy pressure. Nvidia slipped 1.25%, Broadcom lost 2.23%, Micron sank 10.57%, AMD fell 6.89%, Intel dropped 9.03%, Applied Materials tumbled 9.97%, Lam Research slid 9.71% and SanDisk plunged 10.62%. The Philadelphia Semiconductor Index fell 6.27%.

Sentiment toward chip stocks also weakened after prospects emerged that Meta could move into cloud services using its data-center infrastructure. That followed earlier remarks by Apple Chief Executive Officer Tim Cook, who compared rising memory prices to a “once-in-a-century flood.” Investors worried that Meta’s interest in cloud services could point to overinvestment in AI data centers.

As doubts over capital spending spread, South Korea’s two chip heavyweights, Samsung Electronics and SK Hynix, plunged more than 9% and 14%, respectively, in trading on July 2.

Still, the issue of how Meta might use surplus computing capacity did not surface for the first time this week. At Meta’s shareholder meeting in May, the company said it was considering leasing idle resources to outside companies if excess capacity emerges.

The group leading that effort, Meta Compute, was already established in January. The organization had been viewed as a long-term option as Meta weighed a potential move into cloud services.

“Computing power is still in an absolute shortage phase,” Kim Joong-han, an analyst at Samsung Securities, said. With AI demand surging recently, the broader industry — including Meta itself — is likely still short of capacity, he said. Meta has also remained focused on expanding computing power, recently signing large contracts with Neo Cloud and data-center infrastructure companies.

Brokerages said fears of weakening AI infrastructure demand were overblown despite the sharp market drop on July 2, and recommended buying on weakness.

“The volatility in semiconductor shares recently reflects shaky sentiment caused by mixed interpretations of the same developments, rather than the emergence of a new negative factor,” Cho A-in, an analyst at Samsung Securities, said. If second-quarter earnings come in above market expectations, doubts about the durability of AI investment could ease.

Mirae Asset Securities, based on the latest guidance from global big tech companies, estimates total capital spending this year at $806 billion, up 73% from a year earlier. It also expects spending to rise by more than 20% next year despite a high comparison base.

Order backlogs also remain solid. In the first quarter, combined remaining performance obligations disclosed by global big tech companies totaled $2.1 trillion, up 24% from the previous quarter. Of that amount, about $656 billion is expected to be recognized as revenue within two years.

“This issue involving Meta does not appear to signal a decisive drop in AI infrastructure investment,” Kim Young-gun, an analyst at Mirae Asset Securities, said. “This is an effective window for bargain buying in semiconductor stocks.”

Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com