South Korea’s stock market just had the kind of month that makes portfolio managers reconsider their life choices. Foreign investors yanked approximately 18.5 trillion won, roughly $13 billion, out of Korean equities in July 2026 alone. But buried inside that wave of selling was a curious exception: global funds kept nibbling at chipmakers.
The KOSPI carnage in numbers
South Korea’s benchmark KOSPI index dropped approximately 33% from its June peak through late July, with about $2 trillion in market value vanishing in weeks. At one point, the index suffered a two-day loss of 16% in late July, severe enough to trigger circuit breakers.
Cumulative foreign net selling in the first half of 2026 reached approximately 116.36 trillion won, or about $81 billion. July’s $13 billion outflow was just the latest chapter in what had become a sustained exodus from Korean equities, with foreign investors having been net sellers for six consecutive months prior to the July downturn.
Why chipmakers still get the love
Samsung Electronics and SK Hynix together account for over half of KOSPI’s total market value. Both stocks were central to the AI-driven rally that inflated Korean equities in the first place, as global demand for high-bandwidth memory chips and advanced DRAM turned Seoul into one of the hottest equity markets in Asia.
SK Hynix delivered disappointing earnings that shook confidence in the memory chip cycle. Margin pressures from softening memory chip prices added fuel to the selloff. And then there’s the competitive threat from China’s CXMT, which has been steadily building out its DRAM production capabilities and putting pricing pressure on Korean incumbents.
Despite all of that, some global funds continued to buy into the chipmaker thesis. Samsung and SK Hynix remain among the very few companies on Earth capable of producing the most advanced semiconductor memory products, and a 33% drawdown in those stocks attracted selective interest from investors who view AI infrastructure buildout as a multi-year trend.
What macro investors should watch
Fading enthusiasm for AI investments was cited as a key driver of the selloff. South Korea’s semiconductor exports are a bellwether for global tech demand, and the sharp correction suggests investors are recalibrating their expectations for AI-related capital expenditure cycles.
The forced liquidations that accompanied the KOSPI crash also illustrate the risks of leverage concentration. Single-stock leveraged vehicles, popular among Korean retail traders, contributed to cascading selloffs as margin calls forced involuntary selling, amplifying downside moves beyond what fundamentals alone would justify.