Will KOSPI Face a 'Black Monday'? Semiconductor Stocks Plunge on China's Free AI Shock

[Financial News] South Korea's stock market is set for a test on the first trading day after the holiday, as a shock from a free artificial intelligence (AI) model from China and concerns over the profitability of AI capital spending collide. Investors are watching to see whether the market, which fell to the 6,800 level last week, can avoid KOSPI's 'Black Monday.'

On the 17th local time, all three major indexes on the New York Stock Exchange (NYSE) fell. The Nasdaq Composite Index closed at 25,520.24, down 1.40%; the Standard & Poor's 500 Index (S&P 500 Index) fell 1.01% to 7,457.69; and the Dow Jones Industrial Average (DJIA) slipped 0.77% to 52,146.42.

AI semiconductor stocks deepened their losses. The Philadelphia Semiconductor Index, which tracks 30 major U.S. semiconductor companies, fell 1.63%, extending its decline for a third straight session. Compared with its peak set on June 22, the index has dropped nearly 20%, putting it in a technical bear market.

Against this backdrop, investors questioned whether the massive flow of money into the AI industry can actually be recovered as profit. Those doubts led to selling in semiconductor stocks, and even strong results from TSMC and solid U.S. consumer and employment data failed to reverse the weakening sentiment toward tech stocks overall.


Adding to the pressure was 'Kimi K3,' a free AI model newly released by Chinese AI startup Moonshot. As Kimi K3 demonstrated performance comparable to top-tier models from OpenAI and Anthropic, Wall Street began to speculate that companies could build their own AI systems using China's free open models instead of expensive closed models from the United States.
Some market watchers said Kimi K3 is reminiscent of the 'DeepSeek shock' that rattled global AI-related stocks last year.

Asian markets were hit first. Taiwan's TAIEX fell 6.5%, Japan's Nikkei Average dropped 4%, and China's Shanghai Composite Index lost 3%. South Korea's market was closed for a holiday on the 17th, so it avoided the day's selling pressure.

Major foreign media outlets said the Kimi K3 shock has created a shift in investor sentiment similar to the DeepSeek turmoil last year, but it is still too early to conclude that the growth outlook for the AI industry has been damaged.


Meanwhile, after stock markets in major countries swung during the Constitution Day holiday period, South Korea's market enters the second-quarter earnings season this week. Investors are expected to look for signs of a rebound as companies report results.
From the 20th to the 24th, a series of events could move the share prices of Samsung Electronics and SK hynix. Starting with Alphabet Inc. on the 22nd local time, major U.S. Big Tech companies and hyperscalers are scheduled to release earnings one after another.

In particular, semiconductor stocks are likely to take their direction from Big Tech earnings and investment plans that follow Alphabet's report.

In the domestic market, attention is focused on SK hynix's earnings announcement on the 24th. If the company confirms a continued expansion in AI investment and delivers results in line with market expectations, along with a positive business outlook, investor sentiment could recover, especially in semiconductor stocks.
However, if AI investment plans or earnings guidance fall short of market expectations, volatility could continue for some time.

Meanwhile, financial information provider FnGuide estimated that SK hynix's operating profit for the second quarter of this year will rise 603.9% from a year earlier to 6.4947 trillion won. The operating profit forecast was raised by 3.4 percentage points from a month earlier.


hsg@fnnews.com Han Seung-gon Reporter