July 13 became a "black day" for the South Korean stock market. Shares of SK Hynix, the largest memory chip supplier, plunged by a record 15.4%, triggering a massive panic sell-off and activating the circuit breaker on the KOSPI index.
The decline was the culmination of a prolonged trend: by July 13, SK Hynix's stock had lost 38% from its June all-time high, erasing nearly $200 billion in market capitalization. The company's market value, often referred to as "Korea's Nvidia" in the industry, shrank from a peak of $1.25 trillion to $1.05 trillion. In July alone, shares fell by 30%, and there is every reason to believe this month will be its worst since October 2008.
Why did this happen?
The reason is profit-taking by investors who had been aggressively building positions in the semiconductor sector over the past months amid the frenzy around artificial intelligence. Expectations for growth in the memory chip market proved too high, and market participants are now revising their forecasts. The sell-off was not limited to Korean exchanges: SK Hynix's American depositary receipts (ticker SKHY) on the Nasdaq fell 9% to $154, although the day before, on its listing day, they had surged 14% to $170.
Domino effect on KOSPI
The decline of SK Hynix dragged down the entire market. The KOSPI index crashed by 8.95%, closing at 6,806.93 points. During trading, the automatic circuit breaker was triggered for the first time in a long while, temporarily halting trading to stabilize the situation. Such a significant impact of one company on the entire index underscores its enormous weight in South Korea's economy.
Key takeaway: SK Hynix, as a symbol of the AI boom in traditional markets, has shown how fragile this euphoria can be. Investors who chased "artificial intelligence" are now locking in profits, and this process may continue. The memory chip market is entering a correction phase, and in my view, we have not yet seen the bottom—the overheating was too severe.