July 13 became a black day for the South Korean market: shares of SK Hynix, one of the largest memory chip manufacturers, plunged by 15.4%. This is the strongest single-day drop in the company's history, triggering a massive sell-off across the country's stock market.
The crash was the culmination of a prolonged correction. By this point, SK Hynix shares had already lost a significant portion of the value accumulated during the historic rally driven by interest in artificial intelligence. From the June record, the quotes fell by 38%, and the company's market capitalization shrank from approximately $1.25 trillion to $1.05 trillion. In July alone, the securities dropped by 30%, and the current month risks becoming the worst for SK Hynix since October 2008.
Mechanism Triggered: Circuit Breaker on KOSPI
The fall of SK Hynix shares dragged the entire market down. The KOSPI index crashed by 8.95% that day, to 6806.93 points, leading to the activation of the exchange circuit breaker. The mechanism temporarily halted trading to curb panic sentiment. The chipmaker itself closed at 1.845 million won per share, 15.37% lower than the previous close.
Notably, the sell-off also affected SK Hynix's American depositary receipts, traded on the Nasdaq under the ticker SKHY. During pre-market trading, they fell by 9% to $154, following a surge of more than 14% on their debut day.
This episode vividly demonstrates how one company can determine the dynamics of an entire market. SK Hynix's enormous weight in the KOSPI index made its crash a key factor in the index's record decline. Investors, locking in profits after the AI boom, are reassessing growth expectations for the memory chip market, and this process has proven extremely painful.
My view: The current situation is a classic example of a correction after overheating. SK Hynix shares were overvalued by the market amid the AI hype, and now we are seeing a harsh but natural revaluation. However, for long-term investors, this could open up interesting entry points if the company's fundamental indicators remain strong.