Post by Augustine Chiagozie (@pabloexchange)
💣Asia's AI trade just lost over $400 billion
More than $400 billion has been wiped from stock markets in South Korea, Japan, and Taiwan as the AI chip rally reversed. South Korea's KOSPI briefly opened 3% higher, then plunged more than 15% from its intraday high, triggering a circuit breaker for the second consecutive day, an unprecedented event for the market.
The selloff started with chip stocks. SK Hynix and Samsung Electronics, which together account for more than half of the KOSPI's weight, fell sharply despite strong earnings from SK Hynix. Investors were already worried about AI spending, while growing competition from Chinese memory chip makers added more pressure.
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What made the decline so violent was leverage. South Korean retail investors had piled into leveraged ETFs tied to AI stocks. As prices fell, margin calls triggered forced selling, creating a chain reaction that spread across Japan and Taiwan's technology sector.
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