Key facts
- Samsung Electronics and SK Hynix, previously valued over $1 trillion due to AI demand, have fallen out of the club.
- South Korea's Kospi index has tumbled about 40% from its late-June peak.
- Samsung Electronics reported a significant Q2 profit increase but its stock is down 44% from its peak.
- SK Hynix shares are down 55% from their June peak, despite strong quarterly profit growth.
- South Korea has implemented measures to stabilize the market, including suspending new leveraged ETF listings.
South Korea's stock market has experienced a significant rout, impacting major technology companies Samsung Electronics and SK Hynix, which had previously reached a combined market capitalization exceeding $1 trillion. This surge was fueled by investor enthusiasm for artificial intelligence infrastructure demand. However, the rally has reversed sharply, with both companies falling out of the trillion-dollar club.
The benchmark Kospi index has tumbled approximately 40% from its late-June peak. Samsung Electronics, despite reporting a substantial 1,800% increase in operating profit for the second quarter to 89.5 trillion won ($62 billion), has seen its stock price fall 44% from its recent high. SK Hynix, which also posted a strong quarter with a 557% surge in operating profit, has experienced an even steeper decline, with its shares down about 55% from their June peak. The companies are now valued at approximately $923 billion and $704 billion, respectively.
SK Hynix's transformation into a leading supplier of high-bandwidth memory chips for AI accelerators was a key driver of its previous valuation. The company's recent $26.5 billion Nasdaq ADR offering, priced at $149 per ADR, has seen its US-listed shares trade below that level, reflecting a cooling of enthusiasm for AI chip stocks.
The market downturn has been exacerbated by South Korea's boom in single-stock leveraged exchange-traded funds. Retail investors unwinding leveraged positions have added momentum to falling share prices. In response, South Korea has suspended new listings of these leveraged ETFs and is implementing additional measures to stabilize the market, including limiting retail access to such products. Analysts suggest these measures may accelerate near-term selling but should lead to a healthier market once deleveraging is complete.