South Korea’s Kospi index jumps more than 15% on a surge of chipmaking stocks

Asian shares mostly declined on Wednesday, with South Korea's Kospi extending significant losses, partly due to investor concerns about massive AI investments. Oil prices also slipped amidst ongoing volatility following U.S. strikes against Iran in response to an attack on a U.S. base. In South Korea, chipmaker SK Hynix saw its shares drop despite reporting a record quarterly profit, as it fell short of analyst expectations. In contrast, Samsung Electronics gained after reporting a record operating profit. Major U.S. chipmakers like Nvidia and AMD also experienced declines. The U.S. stock market traded lower, influenced by the Federal Reserve's decision to hold interest rates steady and a lack of clear future guidance from the central bank, contributing to market uncertainty.

Samsung Electronics reported a record operating profit of $62 billion for the April-June period, driven by strong demand for AI-related memory chips. This follows similar record earnings from rival SK Hynix, as both South Korean chip giants benefit from the global AI boom. Samsung's semiconductor business saw significant growth, offsetting losses in other divisions. Despite these record profits, shares of both companies have fallen due to concerns about massive spending on manufacturing capacity and increasing competition from China. Analysts are also questioning the potential returns on these large investments.

South Korea is facing a debate about its 52-hour workweek law, particularly in light of a massive semiconductor initiative. The country's President Lee Jae Myung, alongside leaders from Samsung Electronics and SK Hynix, announced an 800 trillion won (US$548 billion) semiconductor investment. However, leading South Korean newspapers are arguing that before further investment, the laws limiting workers to a 52-hour week need to be addressed. This discussion is prompted by situations where highly engaged engineers, like one working past midnight in Hwaseong, are legally required to stop working, raising questions about how artificial intelligence might be impacting the value and measurement of work hours.

South Korea's stock market has experienced a significant plunge, with the benchmark KOSPI index dropping for two consecutive sessions and on track for its steepest monthly decline on record. This selloff, which has erased nearly 40 percent of the index's value from its recent peak, is attributed to a decrease in investor interest in chipmakers, previously boosted by AI investments. Finance Minister Koo Yun-cheol apologized for the introduction of single-stock leveraged ETFs, which some analysts believe amplified leveraged trading, and stated the government is reviewing market stabilization measures, including regulation of these funds. Top financial officials met to discuss the crisis, following previous announcements of tighter regulations on ETF investments.