Global semiconductor stocks tumbled Tuesday, triggering a sharp decline in South Korea's KOSPI index and weighing heavily on major chipmakers [1, 3].

This selloff signals a growing anxiety among investors that the massive spending boom fueling artificial intelligence may be unsustainable. The volatility threatens the stability of the global tech supply chain, particularly for nations like South Korea that rely heavily on semiconductor exports.

Market data shows significant volatility for the KOSPI. Reports on the index's decline vary, with figures ranging from a seven percent drop [3] to as much as 8.1 percent [2], while some reports indicate the index plunged over 10 percent [5].

Samsung Electronics and SK Hynix, two of the world's largest memory chip producers, saw their shares slump by at least nine percent [2]. These losses reflect a broader rout across the semiconductor sector as market participants reassess the valuation of AI-driven growth.

Beyond spending concerns, a report regarding Chinese industrial capabilities added to the pressure. A Chinese state-backed company has reportedly begun mass-producing immersion deep-ultraviolet (DUV) lithography machines [4, 6]. These machines are critical for producing advanced chips, and their mass production in China raises fears of intensified competition and a shift in the global market share.

Investors are now grappling with the possibility of a market correction. The combination of potential overcapacity in AI hardware and the emergence of state-supported Chinese alternatives creates a precarious environment for established chipmakers [1, 4].

“KOSPI index plunges as investors fear unsustainable AI spending”

The simultaneous crash in semiconductor stocks and the news of Chinese lithography breakthroughs suggest a pivot point for the AI industry. If China can successfully mass-produce DUV machines, the strategic moat held by Western and South Korean firms shrinks, potentially leading to lower margins and increased geopolitical tension over chip sovereignty.