The decline followed an artificial intelligence (AI)-led chip outlook from U.S. chipmaker Broadcom, which reignited fears that the AI boom has run ahead of itself. The drop of about 479 points from the previous session was sharp enough to trigger a "sidecar," an automatic curb on program trading activated when index futures fall 5 percent.
The damage tracked a single variable across Asia: how heavily each market leans on chips. In Seoul, where Samsung Electronics and SK Hynix together account for an outsized share of the index, the blow was the hardest. SK Hynix tumbled nearly 10 percent to around 2,070,000 won and Samsung Electronics fell about 6 percent to around 330,000 won ($214.4), the two giants that drove this year's record rally now leading its sharpest reversal. The small-cap KOSDAQ fell about 4.5 percent.
Foreign investors sold roughly 3.5 trillion won of South Korean stock, extending the longest selling streak in the market's modern history, and the won weakened past 1,540 to the dollar, a fresh low for the year and another step in the slide the Bank of Korea warned of two weeks ago.
The day was not uniformly red, however. As investors fled the crowded chip trade, they ran straight into defensive shelter. Banks were the best-performing sector, with Shinhan Financial Group rising more than 7 percent to around 107,500 won, while the tobacco maker KT&G and the casino operator Paradise also gained.
In a telling sign of the flight to safety, Hyundai Motor ended essentially flat at around 698,000 won, barely moving while the market around it collapsed. The money did not leave Korea so much as hide, the same rotation impulse that has run all week now hardening into an outright defensive crouch.
The shock originated across the Pacific. Broadcom's outlook sent the Philadelphia Semiconductor Index down more than 5 percent overnight, and the question it raised, whether the year's relentless AI rally had finally met a catalyst large enough to break it, is the one that each market in the region then answered differently.
China's Shanghai Composite slipped just 0.75 percent to around 4,028, but not because its chipmakers were spared. They were not. The foundry SMIC fell more than 5 percent to around 128 yuan, the AI-chip designer Cambricon dropped about 4.5 percent, and Hua Hong Semiconductor tumbled more than 7 percent, declines every bit as steep as South Korea's.
The difference was what surrounds them: where two chipmakers dominate Korea's index, the Shanghai market is anchored by giant state-owned banks, energy producers, and industrial names that held firm and cushioned the benchmark even as its technology shares sold off. Beijing's market did not dodge the AI scare; its sheer breadth simply absorbed it.
Japan landed in the middle. The Nikkei 225 fell more than 1 percent to around 66,588, a second straight decline after setting a record earlier in the week, with the damage concentrated in the chip-equipment makers most exposed to Broadcom's warning.
Tokyo Electron tumbled nearly 7 percent to around 59,400 yen and Advantest fell about 5 percent to around 26,900 yen. SoftBank Group, which had fallen sharply the previous day, steadied to edge up about 1 percent to around 7,400 yen as the selling rotated away from it. Japan's loss was milder than South Korea's, cushioned by a more diversified index and a weak yen that supports exporters such as Toyota.
Friday was a stress test, and it measured one thing above all: how much of each market is tied to the AI chip trade. South Korea, where semiconductors are effectively the index, took the full force and watched money flee into banks and defensives; Japan absorbed a glancing blow; and China's benchmark barely moved, not because its chipmakers escaped but because they are a far smaller part of a far broader market.
The question now is whether Broadcom's warning marks a genuine turn in the AI cycle or merely a pause, and whether the foreign selling and the sinking won that have shadowed this rally all along have finally found the catalyst to bring a record run back to earth.
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