Chip stocks slide as South Korea halts trading and Nasdaq drops

In short: A global drop in chip and AI-related stocks hit South Korea especially hard and pulled U.S. tech shares down too.

What's going on

South Korea’s main stock index, the KOSPI, fell sharply during early trading on June 8. Reports said it dropped more than 8 percent and at one point around 10 percent, which triggered a market-wide circuit breaker. A circuit breaker is an automatic pause in trading, like a timeout, meant to slow panic selling.

The fall was led by chipmakers, which are closely tied to today’s AI boom because AI systems need large numbers of advanced chips to run. Two of the biggest companies in South Korea’s market, Samsung Electronics and SK Hynix, both fell around 10 percent during the day. Because the KOSPI is heavily weighted toward these firms, their declines dragged the whole index down.

The selling spread to other markets. In the U.S., the Nasdaq, which has many tech and chip stocks, opened down about 2.2 percent. A key trigger was Broadcom, a major chip supplier, whose guidance for AI chip sales did not match very high investor expectations.

Higher interest rate worries also played a role. A stronger-than-expected U.S. jobs report raised concerns that the Federal Reserve could keep rates higher for longer, or even raise them again. Higher rates often hit fast-growing tech stocks hardest because investors value their future profits less when borrowing costs rise.

What to watch

Investors will be watching for more updates from chip companies about AI demand, and for U.S. economic data that could change interest rate expectations. Another risk is forced selling from investors using borrowed money, since falling prices can trigger margin calls (a demand to add cash or sell assets).

Source: NYTimes