South Korea's leading chipmakers stumbled sharply on Monday, as investors cashed in profits following Friday's explosive rebound. Samsung Electronics fell 6.48% and SK Hynix lost 6.69% by mid-morning in Seoul, dragging the Kospi down 4.25%.
The pullback came just one session after Samsung surged 26.81% and SK Hynix jumped 29.95%—both hitting daily limits—helping the benchmark index post a record 17.91% gain. That rally followed a brutal three-day selloff that had erased more than 17% from the Kospi, leaving chip stocks deeply oversold and short sellers scrambling.
Friday's rebound meets reality check
Friday's surge was fueled by strong earnings from Microsoft and Amazon, which eased fears that big tech firms might scale back AI infrastructure spending. Foreign investors poured a net 7.22 trillion won into Korean shares, while institutions added 1.15 trillion won, according to market data. Bargain hunting and short covering amplified the move.
But the scale of that rally made Monday's profit-taking almost inevitable. Han Ji-young of Kiwoom Securities had cautioned that investors could lock in gains early this week after the unprecedented jump, as reported by the Korea JoongAng Daily.
Monday's losses don't necessarily signal a deterioration in chipmakers' earnings outlook. However, the failure to hold even the first session after Friday's rebound weakens the case that a durable market bottom has been established.
Leverage remains the biggest fault line
The more pressing risk is positioning, not collapsing profits. Peter Kim, senior managing director at KB Securities, told Reuters last week that the selloff was "not driven by fundamental deterioration," blaming fragile sentiment and forced unwinding in single-stock leveraged ETFs in Korea and overseas. He warned that the amount of leverage built up in the market means the clean-out could take more than a week or two.
That caution is relevant because sharp rebounds can tempt traders to rebuild exposure before margin pressure fully clears. Gary Tan, a portfolio manager at Allspring Global Investments, noted that "strong is no longer enough" in the current AI market. Investors want clearer signals on long-term supply agreements, shareholder returns, and the durability of the memory cycle.
China fears collide with strong memory demand
Longer-term concerns remain. Investors are weighing Chinese memory-chip competition, advances in domestic semiconductor equipment, and whether debt-funded AI capex can stay sustainable. Chris Beauchamp, chief market analyst at IG, told The Guardian that Chinese chipmakers could eventually undercut established producers and compete aggressively on price.
Yet the near-term picture is less bearish. Forrester analyst Alvin Nguyen described the memory-stock selloff as an "overreaction," arguing that manufacturers still can't produce enough chips to meet demand, with shortages possibly lasting until 2030.
That tension makes the "bull trap" label premature. Friday looks more like an unstable relief rally than proof of a lasting recovery. Earnings and memory demand remain strong, but investors need evidence that forced deleveraging is ending, foreign buying is becoming consistent, and hyperscalers remain committed to AI spending.
For more on the broader AI-driven market moves, see our coverage of Amazon's cloud strength fueling an AI rally and the sustainability of Asia's AI rally.
This article is for informational purposes only and does not constitute financial advice.
