Global stock markets absorbed heavy selling pressure as South Korea’s Kospi index plunged 10.8 percent on July 28, 2026. Semiconductor shares led the retreat amid escalating concerns over artificial intelligence datacentre borrowing costs, surging energy prices in the Middle East, and growing competition from Chinese chip manufacturing tools.
Asian Markets Stumble as South Korean Semiconductor Giants Plunge
The sell-off in artificial intelligence infrastructure stocks deepened sharply, driving South Korea’s stock market down to its lowest level in three months and dragging Asian markets down to multi-month lows. Investors continued to ditch chip stocks amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans. In South Korea, steep declines by major semiconductor firms prompted the Korea Exchange to briefly suspend trading twice on the main Kospi index, which fell 10%. The index ultimately closed down 10.8 percent at 6,023.66, marking its lowest level since April. Individual share losses across Seoul were severe. Shares in Samsung Electronics sank 13.4 percent, while SK Hynix tumbled 14.7 percent. The downward pressure followed a difficult trading session on Wall Street, where SK Hynix’s U.S.-traded shares fell below their initial public offering price of $149, closing at $143 a share.
Chinese Chip Manufacturing Advances and Circular Funding Strains
Market participants increasingly questioned the sustainability of massive artificial intelligence investments and valuations following fresh developments across the hardware supply chain. Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by the Information that China has begun mass production of homegrown deep ultraviolet chipmaking tools, equipment essential for printing minute circuit patterns onto silicon wafers.
The competitive threat from domestic Chinese alternatives was further underscored when shares in memory chipmaker CXMT rose 466 percent during its trading debut on the Shanghai stock exchange after raising at least $8.6 billion in its initial public offering.
We believe the market was likely spooked by the progress of China’s chip-making equipment capabilities, and was worried that this progress would threaten the competitive position of global chip making and chip equipment leaders, Jing Jie Yu
At the same time, investor anxiety grew regarding circular funding structures within the industry, where artificial intelligence firms finance one another. Reports surfaced that Nvidia was discussing a backing arrangement for a massive datacentre project in Ohio with OpenAI, a move that drove Nvidia shares down 5 percent and pushed its five-year credit default swap rates higher.
Wall Street Weight and Broad-Based Sector Rotation
In the United States, technology-heavy indexes faced sustained headwinds as portfolio managers rotated toward defensive sectors. Micron Technology dropped 5.5 percent, following a 10.6 percent plunge in the previous session, while Nvidia fell 1.4 percent. Because the AI boom has made it the largest stock on Wall Street by value, a 1.4% move for Nvidia has more effect on the S&P 500 than a similar move by any other company,” reported the Associated Press on market index weightings. Analysts pointed to a broader reassessment of capital expenditure returns. What began as an AI infrastructure bottleneck is now spreading into hardware margins, device affordability, cloud costs, inflation, and policy, market observers noted as momentum selling rippled across semiconductor holdings.
Geopolitical Tensions and Middle East Energy Disruptions
Compounding the technology sector correction, renewed military strikes in the Middle East rattled commodity markets. Following attacks on shipping routes in the Strait of Hormuz, international energy prices climbed sharply, reigniting inflationary concerns.
Brent crude traded near $84.52 a barrel after falling $1.35 during fluctuating diplomatic efforts, while U.S. benchmark crude lost 81 cents to a barrel. The elevated energy expenses added fresh uncertainty regarding future central bank monetary policy adjustments and borrowing costs across global equity markets.
