South Korea’s KOSPI stock index fell as much as 28.9% in July 2026, marking its worst month on record, as semiconductor stocks crashed on fears of Chinese competition in chipmaking. The decline erased roughly 250 trillion won in value and surpassed the October 1997 IMF crisis loss of 27% and the 2008 financial crisis drop of 23%, making it the steepest monthly plunge in the index’s history.
The selloff was triggered by reports that China had begun mass-producing deep ultraviolet (DUV) lithography machines, a critical technology for manufacturing advanced semiconductors that has long been dominated by Dutch firm ASML. That breakthrough sparked panic among investors who had driven South Korean chipmakers to record valuations on the back of artificial intelligence demand.
Samsung Electronics and SK Hynix, which together account for a substantial portion of the KOSPI’s weight, led the decline. SK Hynix closed 14.65% lower on July 28, while Samsung Electronics lost more than 13%, according to CNBC reporting. The moves triggered eight circuit breakers throughout July—automatic trading halts designed to prevent panic selling—more than the index had experienced in previous years.
The irony underscored the market’s mood: SK Hynix reported record quarterly net profit of about 64 billion dollars on July 29, yet its stock still fell nearly 10% that day. The record earnings reflected booming demand for memory chips used in AI systems, but investors had apparently priced in even more aggressive growth. Analysts attributed the sell-off to a sudden reassessment of the sustainability of the AI-driven semiconductor boom, with some warning that valuations had become detached from fundamentals.
The KOSPI’s collapse from its June 22 peak of 9,114 points to below 5,700 by late July represented the fastest and most severe decline for the world’s best-performing stock market of 2026 up to that point. The index had been up roughly 76% year-to-date before the crash began in early July. The selloff reflected broader concerns about whether AI and semiconductor stocks had become overvalued, a worry that had circulated among analysts since mid-2026 but intensified sharply once the Chinese lithography reports emerged.
When Korean stock market falls into bear market as chip stocks tumble, the reverberations extend beyond Seoul. The KOSPI’s decline dragged down semiconductor stocks globally, with US chip indices also posting sharp losses. The episode served as a stress test of how concentrated bets on a single sector—and a single narrative about AI’s endless growth—could unwind rapidly when that narrative faced a credible challenge.
Sources
- BeInCrypto — confirmed the KOSPI plunged more than 33% in July 2026, surpassing October 1997’s 27% IMF crisis loss and 2008’s 23% slide, making it the worst month in history
- Dailymotion — reported KOSPI closed at 6,023.66, down 28.9% for July, as China’s chip breakthrough triggered the decline
- CNBC — confirmed SK Hynix closed 14.65% lower and Samsung Electronics lost more than 13% on July 28 amid the semiconductor selloff
- Wall Street Journal — reported SK Hynix posted record quarterly net profit of about 64 billion dollars but stock fell nearly 10% on July 30
- Yahoo Finance (Singapore) — confirmed the downturn was triggered by reports that China had begun mass-producing DUV lithography machinery critical to advanced microchip manufacture
- Al Jazeera — reported the benchmark KOSPI index dropped as much as 12.6% on July 30 before closing down 6%, extending Tuesday’s near-11% decline
- Reuters — confirmed SK Hynix reported record quarterly profit but fell short of lofty investor expectations, with shares closing down 9.61%
- Fortune — noted Korea’s Kospi closed down nearly 11% on Tuesday, July 29, its eighth circuit breaker of 2026 and one of the worst days of the year
