South Korea’s KOSPI fell 2.66% to 6,518.92 as semiconductor stocks faced selling pressure amid reports of increased US demands for local chipmakers to invest in American facilities.

Semiconductor Sell-off

Shares of SK Hynix Inc in Seoul dropped 5.03% to 1.587 million Korean won. Samsung Electronics declined 2.92% to 249,500 won. The sell-off extended to US-listed shares, with SK Hynix ADRs falling 4.92% to $155.37 during regular trading and slipping another 0.89% to $153.99 in after-hours trade.

Japan’s Nikkei 225 fell 1.04% to 64,848.36.

US Investment Demands

US officials reportedly pressed the South Korean government and semiconductor companies to ensure stable supplies through US memory-chip production investments. This pressure intensified after Seoul announced its KRW 800 trillion ($578.5 billion) Honam Semiconductor Mega Project.

Korean officials stated Washington’s concern centers on delays in Korean companies’ planned US investments rather than the domestic project itself. Discussions occurred during Trade Minister Kim Jeong-kwan’s four-day US visit. Seoul maintains these demands are separate from the $350 billion US investment agreement reached last year. The government expects to announce its first US investment project in September.

Oil Prices Slip Amid Sanctions

WTI crude oil fell 0.08% to $84.94 per barrel. Brent crude declined 0.30% to $91.89 per barrel. Natural gas futures slipped 1.11% to $2.751 per MMBtu.

US Treasury Secretary Scott Bessent announced a campaign targeting nearly 60 entities linked to Iran’s nuclear, missile, cyber and oil networks. Iranian Finance Minister Ali Madanizadeh warned Tehran is prepared for the measures and that Iran’s response could go beyond defense.

US Futures Edge Higher

Dow futures fell 3.00 points (0.01%) to 53,486.00. S&P 500 futures rose 3.00 points (0.04%) to 7,672.75. Nasdaq 100 futures gained 13.25 points (0.05%) to 29,119.00. The US dollar index stood at 98.973, down 0.01%.

Economist Kim Young-ik, known as Korea's 'Dr. Doom,' has issued a bearish outlook for the KOSPI, warning that the market rally may be approaching a turning point. Despite significant gains in semiconductor stocks, Kim argues that the market has shifted from undervalued to overvalued, driven by speculation rather than fundamental investment.

Kim, an adjunct professor at Hanyang University’s Future Talent Research Institute, acknowledged that his earlier bearish forecast was incorrect due to stronger-than-expected nominal GDP growth. However, he now points to South Korea’s leading index cyclical variation as a critical signal. The indicator rose through the first half of 2026 but peaked in June and has since started declining.

Market Performance vs. Economic Indicators

The divergence between stock performance and economic indicators is stark. In July, the KOSPI tumbled 22.18%, its steepest monthly decline since the 2008 global financial crisis. This drop was driven by retail investors unwinding leveraged positions and concerns over slowing hyperscaler spending.

Despite the July selloff, major tech stocks have delivered massive returns in 2026:

SK Hynix made its Nasdaq debut under the ticker SKHY on July 10, raising $26.5 billion through its ADR offering. As of Friday, the KOSPI closed at 6,977.94, up 61.92% year-to-date and 119.62% over the past year.

What the Numbers Show

The data reveals a sharp concentration of gains in specific sectors despite broader market volatility. While the KOSPI suffered a historic 22.18% decline in July alone, Samsung Electronics and SK Hynix maintained year-to-date gains of 113.62% and 142.98% respectively. This divergence suggests that the overall market performance is heavily dependent on the AI trade, making it vulnerable to shifts in sentiment or spending patterns among hyperscalers.

Risks from Leverage and AI Speculation

Kim warned that excessive optimism surrounding AI could create broader financial risks if companies fail to generate profits justifying their valuations. He compared the current environment to previous bubbles, including the dot-com era, noting that transformative technologies can still produce destructive investment bubbles.

Key concerns cited by Kim include:

• Elevated return expectations among investors.
• Increasing use of leverage in the market.
• Slowing export growth as a warning sign for the economy.

Kim expects the KOSPI to enter a downtrend through the first half of next year, with temporary rebounds possible. He warned that the index could potentially fall below 5,000 if the downturn intensifies.