KOSPI Drops 10% as Rumors of SK Hynix’s HBM4 Expansion Trigger Global Chip Sell-Off

Article by: Tide Research

On Monday, South Korea’s KOSPI index plunged 10%, with SK Hynix and Samsung falling over 12%, triggered by rumors that SK Hynix might slow down its HBM4 expansion. This shock in Korean equities quickly spread to U.S. chip stocks, causing Micron to drop 13.18% to $1,051.77, SanDisk to fall 13.64%, and Marvell to decline 8%. The Philadelphia Semiconductor Index closed down 7.87%, while the Nasdaq ended 2.21% lower at 25,587.04.

The Nasdaq fell 2.21% to 25,587.04, the S&P 500 dropped 1.44% to 7,365.46, and the Dow slipped 0.09% to 51,666.84. Chip stocks suffered the biggest losses of the day, with memory chips hit especially hard. Micron, SanDisk, and Western Digital declined 13.18%, 13.64%, and 8.5% respectively, prompting a repricing of the entire memory chip ecosystem. NVIDIA fell over 4%, AMD dropped more than 5%, Intel slid more than 6%, and the Philadelphia Semiconductor Index closed down 7.87%.

Defensive sectors held up relatively well. IBM rose 5.04% to $264.94, Accenture increased 1.75% to $127.01, Walmart gained 1.91% to $119.42, and Johnson & Johnson rose 3.37% to $239.075.

SpaceX rose 0.98% to $156.11, ending a three-day losing streak. The VIX surged to 19.49, up 12.79% from the previous day. In commodities, WTI crude fell to $73.10, hitting a three-month low; Brent crude dropped to $77.20; gold slipped below $4,100. Bitcoin declined 4.23% to $62,266, while Ethereum fell approximately 5.7%. The U.S. Dollar Index reached its highest level in over a year, and the offshore renminbi fell nearly 200 pips, approaching 6.80.

The key point is that this selling pressure was not directed at AI demand itself, but rather at a reassessment of excessive optimism regarding storage chip production capacity. Rumors of SK Hynix slowing down HBM4 expansion triggered a simple yet devastating chain of logic: if there are signs of weaker-than-expected supply in the HBM market, the certainty of the entire AI infrastructure cycle diminishes.

Thursday’s PCE inflation data will determine market repricing of federal funds futures. CME data shows traders are now pricing in a September rate hike, whereas just two weeks ago, only one rate hike for the year was expected. If the PCE data comes in hotter than expected, the probability of a rate hike could jump directly above 50%. On the same day, Micron will release its earnings report; Wall Street expects Q3 revenue of approximately $34.5 billion. The key focus will be whether the HBM gross margin can hold at 81% and management’s guidance on HBM capacity for 2027. Any conservative remarks could trigger a secondary sell-off.

The U.S.-Iran oil exemption takes effect, with the U.S. approving Iran to sell oil within 60 days, keeping inventory and supply expectations in check and continuing to pressure oil prices. The geopolitical premium has largely disappeared.

The most direct implication of this sell-off is that the AI arbitrage cycle has shifted from frenzy to rational pricing. The 10% drop in Korean stocks is not a technical correction, but rather a sign that major institutions are beginning to question whether the growth rate of AI capital expenditures is sustainable. Storage chip prices have already tripled, and whether demand can match this supply expectation has now become a critical question.

Micron was previously priced as a stalwart of AI infrastructure, but now it is being priced as a cyclical commodity. A single piece of bad news could trigger a sharp reversal. While the Dow edged lower, the Nasdaq plunged more than 2%, signaling that the AI sector is losing its dominance. Micron’s earnings report and the PCE data on Thursday will be a turning point. The market isn’t looking for quarterly figures—it’s seeking long-term supply certainty. That certainty has significantly diminished since yesterday.