AI Bubble Fears Trigger Sharp Selloff in Korean Markets

South Korea’s KOSPI index got hammered on Tuesday, plunging 135.63 points (-3.32%) to close at 3,953.62 as risk-off sentiment swept through Asia.

The sell-off was brutal and indiscriminate. Tech stocks cratered—SK Hynix dropped 5.94%, Samsung SDI fell 4.89%, and LG Electronics slumped 4.16%. Financials bled too: KB Financial down 3.39%, Shinhan Financial off 2.30%. Automakers couldn’t escape the carnage either, with Hyundai Motor losing 2.58% and Kia Motors dropping 2.47%.

What’s driving the pain? The AI bubble narrative is back in focus. Traders are spooked by elevated valuations and are now waiting for Nvidia’s earnings to determine whether the AI hype is justified or overblown. Until then, expect choppy waters.

The contagion from Wall Street didn’t help. The Dow dropped 1.07%, NASDAQ fell 1.21%, and S&P 500 shed 0.83% as tech weakness persisted. Volume on the KOSPI hit 317.62 million shares, with decliners outnumbering gainers 817 to 83—a clear sign of capitulation.

On the bright side, crude oil surged 1.49% to $60.80 per barrel as U.S. government shutdown concerns eased, though that’s little comfort to equity investors right now.

The KOSPI’s near-term outlook remains fragile. After rallying 220 points (+5.5%) just days ago, the index is vulnerable to further downside if risk sentiment deteriorates further. Keep an eye on Nvidia’s guidance—it could be the catalyst that either stabilizes or deepens the selloff.