South Korea's Kospi index triggered a circuit breaker following an 18% decline, led by sharp losses in chip giants Samsung Electronics and SK Hynix. This sell-off coincides with a $400 billion market value drop at SpaceX, fueling concerns that AI-driven stocks may have become overvalued after an aggressive two-year rally.
What Happened
South Korean stock markets faced a sharp sell-off on Tuesday, June 23, 2026, with the Kospi index plunging 18% during the trading session. The decline was severe enough to trigger a 20-minute trading suspension after an initial 8% drop, followed by further selling pressure that pushed the index down by another 10% when trading resumed. The market correction was largely driven by heavy selling in technology stocks, particularly chip manufacturers that had been major beneficiaries of the artificial intelligence (AI) boom.
SK Hynix shares dropped over 11%, while Samsung Electronics saw an 8% decline. This marks a significant shift for the index, which had reached a record high of 9,385.59 just days earlier on June 19, following a 122.7% surge in the calendar year 2026 and a 75% gain in 2025.
The AI Valuation Reality Check
The downturn reflects growing investor caution regarding valuations in the AI sector. While AI remains a transformative technology, market participants are now scrutinizing whether current stock prices are supported by actual earnings or if they have been driven primarily by sentiment. The sharp pullback suggests that investors are re-evaluating the "Return on Capital Employed" (ROCE)—a measure of how effectively a company uses its money to generate profit. When stock prices rise faster than the actual profits companies can deliver from their capital spending, it often leads to a natural correction as traders lock in gains.
Why Large IPOs Matter
The market mood was further dampened by developments at SpaceX. The company reportedly saw its market value shrink by over $400 billion this week. SpaceX had previously set a high bar with an IPO priced at $135 per share, achieving a massive $1.77 trillion valuation.
Large initial public offerings can sometimes impact the wider market by draining liquidity. When a massive company enters the public market, passive investment funds—which track specific indices—often must buy shares of the new company. This can force these funds to sell other stocks to raise the necessary cash, potentially adding downward pressure on existing market leaders.
Expert View On Market Rotation
Market analysts are noting a shift in investor behavior. Christopher Wood of Jefferies pointed to the SpaceX IPO as a potential sign that the peak of AI enthusiasm may have passed, warning that liquidity might be strained by a wave of large tech-related listings.
U R Bhat from Alphaniti Fintech noted that while the long-term potential of AI is not in doubt, the current valuations of many related companies are causing discomfort. This has led to speculation that investors might rotate their capital out of high-flying AI stocks and back into traditional information technology sectors that were previously ignored during the AI rally.
What Investors Should Track
Investors may monitor whether this correction remains contained within the tech sector or spreads to the broader market. Key indicators to watch include the upcoming earnings reports from major tech firms, which will confirm if their actual profits justify their current valuations. Additionally, any trend of capital shifting from AI-heavy tech stocks to traditional IT or value-oriented sectors could indicate a stabilization in market sentiment. Finally, keep an eye on capital expenditure (capex) updates from tech giants, as these will provide clarity on whether the AI expansion cycle is slowing down or simply becoming more disciplined.