South Korea's benchmark Kospi Index extended its decline on Monday, slipping 1.3% to 5,477 points, as investors braced for a busy week of earnings from SK Hynix and major US tech companies. The index now sits roughly 42% below its year-to-date high of 9,400 points, reflecting growing concerns about the sustainability of the artificial intelligence rally.
AI bubble fears weigh on sentiment
The recent selloff has been driven by worries that the AI sector is overheated. The AI Stock Bubble Index has climbed to 74, a level that historically has preceded sharp corrections. With SK Hynix and other chipmakers heavily exposed to AI demand, any disappointment could trigger further losses.
SK Hynix is scheduled to report third-quarter earnings this week, and analysts expect another record performance. Operating profit is projected to reach between 76.9 trillion won and 77.9 trillion won, marking the sixth consecutive quarterly high. Revenue is expected to approach 100 trillion won, supported by a 22% rise in DRAM prices and a 15% increase in NAND prices during the quarter.
The company's growth is closely tied to its partnership with Nvidia, whose latest Vera Rubin platform has driven demand for SK Hynix's high-bandwidth memory chips. A strong earnings report could provide a catalyst for the stock, but recent market behavior suggests that even solid results may not be enough to reverse the downtrend. Samsung Electronics, for example, saw its shares remain under pressure despite releasing a strong preliminary earnings report.
US tech earnings and oil prices in focus
The Kospi will also react to earnings from Microsoft, Alphabet, and Amazon, which are due later this week. Positive guidance from these companies could reassure investors that the AI boom is still intact, potentially stabilizing the market.
Meanwhile, crude oil prices have retreated, with Brent falling to $109.90 from last week's close of $117. The decline comes despite ongoing geopolitical tensions between the US and Iran, as well as upcoming elections in Israel and the US. A prolonged conflict could push oil prices higher, which would negatively impact South Korea's energy-dependent economy.
Technical outlook: death cross looms
From a technical perspective, the Kospi is showing bearish signals. The index is hovering near its July low of 5,272 points, and the 50-day moving average is on the verge of crossing below the 200-day moving average, forming a so-called death cross. Additionally, the MACD indicator has moved below the zero line, suggesting that momentum remains to the downside.
If the index breaks below the 5,272 support level, the next target could be 5,000 points. However, a strong earnings season from SK Hynix and US tech giants could provide the boost needed to avoid further declines.
This article is for informational purposes only and does not constitute financial advice.
