Korean stocks are in an extremely fractured position.

Valuations have already fallen to 5.78 times the price-to-earnings ratio, even lower than the trough during the Lehman Brothers bankruptcy in 2008. But that hasn’t stopped today’s selloff. At the open, the market gapped down and fell 4% immediately, effectively making up the “backlog” from last Friday’s global semiconductor rout.

Samsung and SK hynix both dropped more than 5%. SanDisk was knocked down to the 1,300-plus won range. There was almost no meaningful rebound across the board. If you measure from the June high, this market has now accumulated a decline of nearly a quarter.

One fact worth repeatedly thinking about is: even in the most panicked period of 2008, the Korean stock market wasn’t this cheap. Back then, it was emotion-driven overselling; now it’s a combination of slow drift lower plus gap-down selling—hard to say which is more unsettling.

Views among institutions have been completely torn apart. Aia Securities believes the selloff has gone too far, and if the earnings reports from several major U.S. tech giants hold steady, a rebound could be triggered at any time. Goldman Sachs is more aggressive, setting a target price of 12,000, saying the current level is a window to position. UBS is clearly more cautious, seeing only 9,200 and starting to emphasize risks.

Three forces, three judgments—no one can persuade the others. But that’s also a sign that the market is about to choose a direction. After consensus breaks down, it often takes a single sudden event to re-anchor expectations.

What’s most confusing right now is the completely opposite actions between industrial capital and financial capital.

TSMC has just added a $100 billion investment plan. The total could head toward $265 billion, with almost all of it betting on capacity expansion related to AI chips. On the industrial side, the stance is very clear: long-term AI demand hasn’t peaked yet, and if companies don’t expand capacity now, they will fall behind in the future.

But the secondary market isn’t buying it at all. The semiconductor sector has already slipped into a technical bear market, and valuations in the Korean stock market have even broken through the bottom during the financial crisis. The stock prices of leading memory-chip companies are breaking down to lower levels every day.

When both happen at the same time, one of the two directions must be wrong.

If AI demand is truly as strong as the industrial camp believes, why would capital pull out so decisively? If the panic in financial markets is justified, why does TSMC dare to pour hundreds of billions of dollars into this direction?

I can’t simply pick a side. Maybe both are right, just from different time horizons—industry is looking at the landscape three to five years from now, while capital trading is focused on inventory and order fluctuations over the next two or three quarters. But in any case, this divergence can’t last forever. Sooner or later, one side will be disproven.

For people in the crypto space, this can’t be ignored.

The backdrop of this cycle’s crypto bull market has been supported to a large extent by the AI narrative. And memory chips are precisely the most basic link in AI hardware. Now that the foundation is showing severe loosening, risk appetite across the whole set of tech assets will likely be dragged along. Bitcoin may be able to carve out a more independent track, but it will be hard for it to be completely cut off from the sentiment contagion of global tech stocks.

The next few days will be a critical window. The earnings season for major U.S. tech giants is officially entering its peak, and this very likely becomes the turning point in determining what kind of drop this is.

If earnings come in above expectations, and next-quarter guidance remains strong, then this wave of selloff is likely an overreaction in sentiment, and after being mistakingly sold, there may be room for a rebound. If the leaders start lowering expectations, or become vague about capital expenditures, then today’s valuations may not yet have hit bottom.

Cheap doesn’t mean it can’t get even cheaper. Expanding capacity doesn’t mean the stock price will rebound right away.

Industry is charging forward while capital is pulling back. The two lines have completely diverged. Who is right and who is wrong— the market will deliver the answer. But before the answer is revealed, you’d better think through which side you stand on.
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