KOSPI Enters Bear Market on July 8 as Samsung Tumbles 20%

South Korea’s benchmark KOSPI index entered bear market territory on Wednesday, plunging 20% from its June peak as heavyweight Samsung Electronics and memory chip makers collapsed. The index fell another 4% (310 points) to 7,348 on the third consecutive day of losses. Despite Samsung reporting a record 89.4 trillion won (£58.6 billion) in second-quarter operating profit, investors fear the AI-driven chip boom cannot sustain its pace. Foreign investors turned net sellers of shares worth over £300 million.

Samsung’s record profit fails to stem the selloff

Samsung reported a 19-fold surge in second-quarter operating profit to 89.4 trillion won, with revenue jumping 129% to 171 trillion won, both beating analyst expectations. Yet the company’s shares fell nearly 10% on Tuesday and another 4% on Wednesday. Albert Yong, managing partner at Petra Capital Management, told Reuters that Samsung’s strong earnings were widely expected and already priced in after the stock rallied ahead of results.

The collapse suggests investors are repricing the AI trade after months of record gains. Analysts now question whether memory chip prices can keep rising and whether customers will resist higher costs for PCs and smartphones. Kiwoom Securities cut its Samsung price target by 9% to 390,000 won (£257).

Chip stocks caught between AI demand and pricing fears

SK Hynix, the world’s top supplier of high-bandwidth memory, fell as much as 5% on Wednesday despite launching a £28 billion US listing this week. Memory chip stocks globally extended losses as reports emerged that China’s DeepSeek is developing its own AI chip, potentially reducing dependence on Western chipmakers.

Micron and SanDisk dropped over 6% in US premarket trading. The Roundhill Memory ETF (DRAM), which holds Samsung, SK Hynix and Micron as top holdings, fell nearly 7%. Investors worry that slowing memory price growth could cap earnings despite tight supply through the third quarter.

KOSPI still up 74% for the year despite bear market entry

The KOSPI remains the world’s best-performing major stock index in 2026, up 74% year-to-date despite the 20% fall from peak. Goldman Sachs continues to rate South Korea’s stock market bullishly. The index fell 4% to 7,348 on Wednesday, extending three consecutive days of losses as foreign investors turned net sellers of shares worth over £300 million.

Samsung and SK Hynix account for more than half the KOSPI’s market value, making the index highly sensitive to chip sector moves. The sharp reversal from record highs reflects profit-taking and reassessment of valuations after a prolonged AI-driven rally.

Middle East tensions add pressure to risk assets

Renewed US-Iran military conflict pushed oil prices higher, reviving stagflation fears that weigh on growth-sensitive stocks. Brent crude rose 3% to £76 per barrel after US strikes on Iranian targets and Tehran’s retaliatory attacks. President Trump said the ceasefire is “over” and threatened further strikes. The FTSE 100 dipped 0.8% and the DAX fell 1.1% in early trading on Wednesday as energy and geopolitical risks mounted across global markets.

Final Thoughts

The KOSPI’s bear market entry signals a sharp repricing of AI valuations after a nine-month rally. While Samsung’s record profit shows chip demand remains strong, investors now fear the pace of price increases and spending growth cannot continue. With the index still up 74% year-to-date, the pullback may offer selective opportunities for long-term investors.

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