SEOUL — South Korean stock markets witnessed an unprecedented sea of red on July 28, as panic selling erased years of gains in a single trading session. Mounting anxiety over an Artificial Intelligence (AI) market bubble, coupled with disruptive news from China’s semiconductor industry, wiped out investor confidence and sent market mainstays Samsung Electronics and SK Hynix—collectively dubbed ‘Samjon-Nix’—into a steep freefall.

The benchmark KOSPI index suffered a staggering 10.84% drop to close at 6,023.63, barely defending the 6,000-point psychological boundary. Tech heavyweights Samsung Electronics and SK Hynix slid 13.39% and 14.65% respectively. The intensity of the sell-off triggered exchange-wide circuit breakers, temporarily halting trade during the session.

The rout echoed across Asian tech hubs. Japan’s Nikkei 225 dropped over 4%, while NAND flash specialist Kioxia plunged 18.30% to 44,550 yen, suffering a sharper decline than its Korean rivals. Semiconductor equipment makers Tokyo Electron (-10.96%) and Advantest (-10.11%) recorded steep losses. Taiwan’s Taiex index slumped over 4%, dragged down by foundry leader TSMC (-2.98%) and fabless chipmaker MediaTek (-9.92%).

China Shock and AI Valuation Fears Spark Global Liquidity Flight

At the root of the sudden crash lies a dual threat originating from China and Wall Street. China’s fourth-largest DRAM manufacturer, ChangXin Memory Technologies (CXMT), made a dramatic debut on Shanghai’s STAR Market on Monday, skyrocketing 465.82% on its first day of trading. Following its public listing, CXMT announced aggressive plans to expand its monthly wafer production capacity to roughly 350,000 wafers by 2026—bringing its output close to U.S. memory giant Micron Technology.

Adding to global supply concerns, reports emerged that domestic Chinese firms achieved mass production of deep ultraviolet (DUV) lithography equipment, stirring fears of structural cracks in the global memory oligopoly and impending oversupply.

Simultaneously, U.S. chip leader NVIDIA slumped 4.99% overnight amid controversy surrounding its extensive infrastructure deals, including credit guarantees for massive data center projects. Wall Street analysts raised red flags over potential “circular financing” risks—where NVIDIA provides financial backstops or equity backing to entities that subsequently order its AI chips. This raised doubts regarding whether underlying AI hardware demand is organic or artificially inflated, chilling sentiment across the broader technology value chain.

Wall Street and Local Analysts: "Fundamentals Intact, Time to Buy"

Despite the market carnage, equity strategists and research heads argue that the sell-off reflects emotional contagion and short-term liquidity distortions rather than structural damage to domestic corporate competitiveness.

Han Ji-young, a senior researcher at Kiwoom Securities, emphasized that CXMT shares on the STAR Market remain unavailable through foreign trading schemes like Stock Connect, restricting capital flight out of global memory leaders. Han added that China’s domestic DUV equipment production volume remains very small, making any disruption to the global chip ecosystem unlikely in the short term. "With domestic stock valuations touching historical cyclical floors, phased accumulation of market leaders represents an effective strategic response," Han evaluated.

Kim Dong-won, Head of Research at KB Securities, noted that China's aggressive domestic AI initiatives mean local chip consumption exceeds supply, preventing excess Chinese inventory from flooding global markets. Kim emphasized that Samsung Electronics and SK Hynix hold long-term supply agreements (LTAs) with U.S. hyperscalers and tech giants, isolating their core clientele from CXMT's target segments.

Addressing market rumors about Apple potentially adopting Chinese DRAM, Kim dismissed the likelihood as negligible, citing strict geopolitical scrutiny from the U.S. Congress and Chinese government controls over exporting strategic technology assets.

Looking further ahead, Kim projected highly favorable mid-to-long-term supply-demand dynamics for Korean chipmakers. As long-term supply contracts with top-tier U.S. technology companies expand significantly from 2027, the vast majority of premium DRAM and High Bandwidth Memory (HBM) capacity will go to major enterprise clients. This supply prioritization will likely intensify memory shortages across B2C hardware sectors like smartphones and personal computers, preserving robust pricing power and strong earnings visibility for Korean leaders.

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