KOSPI Plunges on Concerns Over AI Data Center Regulation, Then Cuts Losses After Falling Below 5,000 Intraday

The KOSPI plunged by as much as about 8% early in the session, falling below 5,000, while Samsung Electronics briefly dropped to KRW 175,000. It later pared losses on bargain buying and at one point recovered above 5,100, but weakened Asian markets in the afternoon sent the KOSPI back down to the 5,070 level, a decline of 5.8%. The KOSDAQ also fell more than 7% intraday before trimming losses, but traded around 647 in the afternoon, down 4.5%.

Foreign investors recorded net sales of more than KRW 1 trillion on the KOSPI, with the amount later rising to around KRW 1.2 trillion. Foreign selling also continued on the KOSDAQ, while foreign investors were observed turning net buyers in the futures market. Institutional buying was concentrated among financial investment firms, and pension funds also shifted to buying during the session. Retail investors bought cash equities, but reduced the scale of their purchases from early in the session.

The won-dollar exchange rate rose by about KRW 2.40 from the previous day to around KRW 1,359. Volatility in the KOSPI was severe enough to trigger a circuit breaker early in the session, while bargain buying helped recover some of the losses during ongoing trade. However, major Asian markets including Japan, Taiwan and Shanghai weakened again in the afternoon, limiting the domestic market's recovery.

On Wall Street, the Nasdaq fell more than 5% and the Philadelphia Semiconductor Index plunged 12%. Concerns that the Democratic election victory could curb new data center investment and permitting weighed on markets, compounding anxiety over AI companies' capital expenditure plans and hedge funds' leveraged positions.

In the U.S. market, concerns over delays to data center investment were accompanied by reports of a bill seeking to restrict superintelligence research, a weak outlook for Qualcomm's handset business, Meta's remarks about difficulties building data centers, and the rise of China's AI industry. With negative headlines coming in quick succession, some observers said investors sold without having time to verify the details of each news item.

Markets also focused on the unusually large decline in the Nasdaq, which fell more than 5% in a single day. Unlike events with clear causes, such as the COVID-19 pandemic or tariff shocks, concerns over slower data center investment and doubts about whether AI growth had peaked amplified the decline. U.S. stock futures rebounded, but the speed at which they could recover about half of the losses after the plunge was seen as a near-term indicator to watch.