One single report was all it took. On July 28, 2026, news that China had begun mass production of homegrown deep ultraviolet chipmaking tools sent South Korea’s stock market into one of its sharpest single-day collapses in recent memory — a South Korea stock crash that wiped out billions in market value and forced repeated trading halts on the Kospi before the session even closed.
Summary
Key takeaways
- South Korea’s Kospi index fell 10.8% to 6,023.66 on July 28, 2026 — its weakest close since April — with trading halted multiple times due to the speed of the decline.
- Samsung Electronics shed 13.4% and SK Hynix dropped 14.7%, with SK Hynix’s U.S.-listed shares closing at $143, below its IPO price of $149.
- China’s mass production of DUV chipmaking tools, reported by The Information, triggered the sell-off by raising fears of accelerating competition in the global semiconductor industry.
- Chinese memory chipmaker CXMT debuted with a 466% surge on the Shanghai exchange before pulling back 4% the following session.
- U.S. chipmakers including Nvidia, AMD, and Micron Technology also declined, while profit-taking on AI-related stocks added to the broader pressure.
Sharp Decline in South Korea’s Kospi Index Amid Chip Stock Crash
The Kospi’s 10.8% drop to 6,023.66 ranks among the largest single-session moves the index has recorded in years. The decline was so rapid that circuit breakers triggered multiple trading halts throughout the day — a mechanism designed to slow panic selling when markets move too fast for orderly trading to function.
The damage to South Korea’s two flagship chipmakers was severe. Samsung Electronics shares fell 13.4%, while SK Hynix dropped 14.7%. The sell-off hit other AI-linked names too: Samsung SDI fell 11.37%, LG Innotek dropped 16.29%, and Seoul Semiconductor lost 8.78%, according to CNBC.
SK Hynix’s Wall Street debut turns ugly
The timing could not have been worse for SK Hynix. The company had only recently listed on Wall Street, pricing its IPO at $149 per share. By Monday’s close, those U.S.-traded shares had already slipped to $143 — below the offering price before the ink had barely dried. Sharp swings in SK Hynix shares underscore the uncertainty surrounding the AI investment cycle, said Owen Lamont, senior vice president at Acadian Asset Management. “Right now we’re facing an incredible uncertainty,” he told CNBC. “No one has any idea how this AI process is going to affect our economy.”
Lamont also pointed to a structural amplifier: leveraged exchange-traded products. “The entire ecosystem of levered ETFs in Korea, also in Hong Kong and in the United States, are possibly adding volatility and magnifying market fluctuations,” he said. That dynamic helps explain why the moves looked so outsized relative to the underlying news.
Fears of Accelerated Chinese Chipmaking Spur Market Sell-Off
The immediate trigger was a report from tech publication The Information stating that China has begun mass production of homegrown deep ultraviolet, or DUV, chipmaking tools — the equipment used to print circuit patterns onto silicon wafers. DUV lithography has long been dominated by Dutch firm ASML, which saw its shares fall more than 8% on Monday. The prospect of a domestically produced Chinese alternative raised one uncomfortable question for investors: how much shorter is China’s path to closing the technology gap than previously assumed?
Sundeep Gantori, chief investment officer for equities at Standard Chartered, acknowledged that the sell-off reflects a genuine deterioration in sentiment, tied to media reports highlighting China’s ambitions in memory chips and lithography equipment. At the same time, he argued the long-term picture has not fundamentally changed: “The market opportunity remains sufficiently large for multiple players to benefit and coexist.” He also noted that some broker reports were circulating around memory price peaks in 2027, adding another layer of near-term concern for investors holding chip names.
CXMT’s dramatic IPO performance in Shanghai
Compounding the fear was the debut of Chinese memory chipmaker CXMT on the Shanghai exchange. The stock surged 466% on its first day of trading, raising at least $8.6 billion in its IPO. The euphoria proved short-lived — CXMT shares fell 4% the following session — but the IPO’s scale and reception sent an unmistakable signal about domestic investor confidence in China’s semiconductor ambitions.
Together, the DUV production news and CXMT’s blockbuster debut painted a picture that markets had not fully priced in: a Chinese chip industry moving faster and attracting more capital than the consensus had assumed. Whether that picture is accurate in its full implications is another matter — but on a trading floor, perception moves prices before analysis catches up.
Regional and Global Market Reactions Amid AI and Chip Sector Volatility
The sell-off spread well beyond Seoul. Tokyo’s Nikkei 225 dropped 4% to 62,364.92, with Tokyo Electron falling 10.96%, Advantest sliding over 10%, and Kioxia — Japan’s computer memory manufacturer — plunging more than 18%. SoftBank Group, a major AI investment proxy through its stake in Arm, fell 4.43%. Taiwan’s Taiex lost 4.7%, with TSMC shares closing nearly 3% lower. Mainland China’s tech-heavy ChiNext 300 index fell 6.49%, while the Hang Seng China Semiconductor Chips Index dropped 7.02%.
The one exception was Hong Kong’s Hang Seng, which bucked the regional trend with a modest 0.3% gain. Shanghai’s broader Composite index fell a more contained 1.2%.
U.S. chipmaker stocks and AI valuation concerns
Wall Street had already absorbed a rough Monday session before Seoul’s rout unfolded. Nvidia dropped 5%, Advanced Micro Devices fell 5.2%, and Micron Technology lost 2.3%. The VanEck Semiconductor ETF lost more than 2%, adding to prior session losses. The S&P 500 finished nearly flat, the Dow Jones Industrial Average rose 0.5%, and the Nasdaq edged 0.2% lower.
The interconnection between Asian tech stocks and the U.S. AI trade has rarely been more visible. Samsung Electronics and SK Hynix are among the world’s largest suppliers of high-bandwidth memory chips used in AI servers, making their valuations directly tied to U.S. hyperscaler spending expectations. Any hint that the AI investment cycle might slow — or that a new competitor could undercut the current supply chain — ripples through both markets almost simultaneously.
Profit-taking on AI-related stocks contributing to sell-off
Beyond the China catalyst, traders noted that some of the selling reflects a more mechanical force: profit-taking after a prolonged rally in AI-related stocks. Concern about whether the AI boom can justify current valuations has been building for months, and the China DUV news gave investors a reason to act on doubts they had already been carrying.
Oil prices added another data point to the day’s macro backdrop. Brent crude dropped to $84.07 a barrel while U.S. benchmark crude fell to $80.99, both down more than 2%, as tensions between the U.S. and Iran showed signs of easing. Lower oil in isolation would normally support equity markets — on this particular day, it barely registered against the scale of the chip sector rout.
Morningstar equity analyst Jing Jie Yu characterized the reaction as “largely a knee-jerk reaction and overdone,” arguing that the dominant position of global chip leaders is unlikely to be meaningfully threatened. Standard Chartered’s Gantori echoed that view, noting that at current valuations, “risk-reward has improved.” But for investors sitting on losses of 13% or 15% in a single session, the analytical argument that the fundamentals remain sound offers cold comfort — and the more unresolved question is whether the memory price peak expected in 2027 will arrive sooner than the market had assumed.
FAQ
What triggered the sharp decline in South Korea’s Kospi index on July 28, 2026?
The decline was triggered by a report from The Information stating that China has begun mass production of homegrown deep ultraviolet chipmaking tools, raising fears of accelerated Chinese competition in semiconductors. A broader sell-off in AI-related stocks contributed additional pressure.
How did major South Korean chipmakers like Samsung Electronics and SK Hynix perform during the sell-off?
Samsung Electronics shares fell 13.4% and SK Hynix dropped 14.7%. SK Hynix also saw its newly listed U.S. shares trade at $143 — below its IPO price of $149 — shortly after its Wall Street debut.
How did other Asian markets and U.S. chip stocks react to the sell-off?
Broader Asian markets declined sharply: Tokyo’s Nikkei 225 fell 4%, Taiwan’s Taiex lost 4.7%, and Shanghai’s Composite dropped 1.2%. Hong Kong’s Hang Seng was a rare exception, rising 0.3%. In the U.S., Nvidia dropped 5%, AMD fell 5.2%, and Micron Technology lost 2.3%.
What role did profit-taking play in the recent market sell-off?
Traders said part of the selling reflects profit-taking after a prolonged rally in AI-related stocks. Growing concern over whether AI valuations can be sustained had been building for months, and the China DUV news provided a catalyst for investors to lock in gains.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
