Kospi Drops as Much as 6.8% as Rising Yields Hit Samsung, SK Hynix on AI Spending Fears

Rising global bond yields hammered the Kospi as concern mounted that higher borrowing costs could weigh on Big Tech spending on artificial intelligence.

On Aug. 19, the Kospi fell as much as 6.8% intraday before paring some of the decline. Samsung Electronics and SK Hynix, two of the index’s biggest components, each tumbled more than 8%, dragging the benchmark lower.

Bloomberg reported that South Korean chip stocks slumped as higher global bond yields stoked concern over the burden of AI investment for Big Tech. US Treasury yields have remained elevated amid inflation and concerns over expanding government debt, raising fears that funding costs could climb for technology companies that have sustained large-scale investment in AI infrastructure.

If rates stay high, borrowing costs for hyperscalers will rise. That would also add pressure to the massive capital spending directed toward AI infrastructure, including data centers and semiconductors. Recent earnings have confirmed that Big Tech investment in AI remains firm, but investors are again worrying that persistently high borrowing costs could limit further expansion over the long term.

Samsung Electronics and SK Hynix had rallied sharply on expectations that rising AI investment would boost semiconductor demand. That left the shares exposed to heavy selling pressure. Investor enthusiasm recently drove the market capitalizations of both companies above $1 trillion.

Jung In-yoon, global chief executive officer at Fibonacci Asset Management, said the long-term outlook for AI growth remains valid. “But investors are no longer willing to pay the same premium for AI growth as before because of high interest rates and geopolitical risks,” he said. He added that profit-taking after the recent strong rally deepened the losses.

Weakening sentiment toward chip stocks extended beyond South Korea to broader Asian markets. The Bloomberg Asia Semiconductor Index fell 3.2%, while Japan’s Kioxia Holdings dropped as much as 11% intraday and Taiwan’s TSMC lost about 2%. Semiconductor and AI-related shares in the US also weakened a day earlier.

Andrew Jackson, head of Japan equity strategy at Ortus Advisors, said AI stocks had run into another obstacle just as they had started to build momentum for a rebound. Doubts are growing over the massive debt loads carried by hyperscalers as long-term borrowing costs remain elevated, he added.

Geopolitical uncertainty over a possible war between the US and Iran also weighed on investor sentiment. Concerns that rising Middle East energy prices could intensify inflation pressure and keep global bond yields higher for longer appeared to reinforce risk-off sentiment centered on South Korean chip stocks.