#KOSPI指数日内暴跌9% KOSPI plummets 10% to trigger a circuit breaker—8th time this year! What happened?

On July 28, Asian stock markets hit a “Black Tuesday.”

By the morning close, South Korea’s KOSPI index had slipped below 6,200, closing at 6,130.84, a new low since April, down more than 9%. At one point during the session, it plunged by more than 10%. South Korea’s KOSDAQ tech board tumbled in tandem, with the decline also exceeding 8%.

This was South Korea’s eighth time this year to trigger the circuit breaker mechanism.

Japan’s market was also being wiped out—Nikkei 225 plunged by more than 2,700 points, down more than 4%, reaching the lowest level since May 22. The TOPIX index’s biggest drop reached 2.7%. The MSCI Asia Pacific index fell by more than 2%.
A chip-stock-driven Asia-Pacific “tsunami” is sweeping through every corner.

01 From the open to the circuit breaker: what happened in 5 minutes?
Today’s early session in South Korea’s stock market can almost be described as “cliff-like.”
At 9:06:02 a.m. on July 28, the Korea Exchange officially activated the SIDECAR “sidecar” mechanism. Data showed that the price of the KOSPI200 front-month futures contract fell from the benchmark price of 1,070.34 to 1,001.54, a drop of 6.42%. Because the futures price decline exceeded 5% and lasted for more than 1 minute, the filing of programmed sell orders was paused for 5 minutes.
But those 5 minutes of “cooling-off” did not stop the selloff.
Around 9:14 a.m., the KOSPI index, after falling by more than 8%, triggered the circuit breaker mechanism, halting trading for 20 minutes. After trading resumed, the decline continued to widen to 9% and then 10%.
From the open to the circuit breaker, it was less than 15 minutes.

02 Who is “wiping out” South Korea’s stock market?
The “culprit” behind this plunge—no suspense here—is chip stocks.
Two memory-chip heavyweights were hit first:
SK hynix plunged more than 13% intraday, once hitting the largest-ever single-day decline
Samsung Electronics’ decline widened to more than 12%
Other Asia-Pacific chip stocks were also in free fall—Japan’s Kioxia stock price once plunged by more than 18%, while Advantest fell by more than 8%. In overnight U.S. markets, the Philadelphia Semiconductor Index once fell by more than 5%; SanDisk sank sharply, closing down more than 11%; and Nvidia fell by nearly 5%.
Why did chip stocks suddenly “collapse”? Three negative factors were triggered at the same time.

03 Three negative factors: Nvidia, China’s competition, and the Federal Reserve
First negative: doubts over Nvidia’s alleged $750B “circular financing”
Nvidia is moving forward with a new round of AI infrastructure transactions, with a potential scale that could exceed $750B. The scale of its AI infrastructure cooperation projects with SK Group exceeds $500B, and it is also discussing providing up to $250B in guarantees for data center projects with OpenAI.
Critics warn: this could involve a serious “circular financing” problem—companies in which Nvidia invests and takes equity typically also buy or use Nvidia chips.
Allspring Global Investments portfolio manager said, “Investors are still worried about circular financing issues. More and more capital is being used to fund future AI customers and infrastructure deployments.”
Coherence Credit Strategies’ Chief Investment Officer put it more bluntly: “Opaque financial structures, off-balance-sheet transactions, and complex relationships among related companies could give rise to ‘financial alchemy.’”
Nvidia’s five-year credit default swap (CDS) spread surged by as much as 14 basis points to 82 basis points in a single day, the biggest intraday increase since the contract became actively traded. The rise in credit risk is seen by investors as a major negative signal.

Second negative: the “rise threat” from China’s memory chips
A Reuters analysis noted in the UK said concerns about intensifying competition from Chinese companies are steadily growing.
South Korea’s Kiwoom Securities analyst Han Ji-young said there are reports that Chinese companies are developing domestically produced deep ultraviolet (DUV) lithography equipment. This has raised concerns in overseas markets that China’s memory chip manufacturers may use domestically made equipment to accelerate capacity expansion, intensifying competition in the global memory chip market.

Third negative: the Federal Reserve’s rate hikes “won’t go away”
Interest-rate futures show traders expect the probability that the Federal Reserve will raise rates by 25 basis points on Wednesday to be about 40%. In its latest report, Castle Securities pointed out that the market may be underestimating the extent of the Federal Reserve’s “hawkish” shift, and a surprise hike cannot be ruled out.
In addition, the situation in the Middle East continues to escalate—Brent crude oil has broken above $100 per barrel—further intensifying global inflation worries.

04 Deep logic: is it time to liquidate the AI bubble?
On the surface, it looks like a selloff in chip stocks; at a deeper level, this is a concentrated clearing of the market’s AI bubble.
Fibonacci Asset Management Global CEO Zheng Renrun said, “The recent selloff in semiconductor stocks seems to be driven more by a sharp deterioration in market sentiment than by any direct change in fundamentals. Investors are increasingly questioning whether the speed of AI infrastructure spending can be sustained.”
Capitalcom senior analyst Kyle Rodda said, “These companies embody the key themes currently affecting market sentiment—too much capital expenditure and spending by AI companies. Investors worry this will erode returns.”
Since SK hynix set a record high in June, its stock price has fallen by a total of 38%. The market is concerned that trading is becoming overly crowded and that leveraged capital is amplifying stock-price volatility.
When a sector becomes so crowded that everyone thinks “it won’t fall,” that’s often when risk is at its highest.

On July 28, South Korea’s stock market delivered a “risk education” lesson to global investors with its “eighth circuit breaker of the year.”
When a market’s core logic shifts from “performance-driven” to “faith-driven,” and from “fundamental pricing” to “narrative pricing,” bubble liquidation often only needs a single trigger.
Nvidia’s $750B worth of AI transactions—are they a milestone for an industrial revolution, or a “financial alchemy” Ponzi game?
The answer may still require time to be validated, but the market has already cast its vote with its feet. $SKHY ‌