Why Foreign Money Is Fleeing Korea's Record AI Rally

Asia tech stocks extended their sell-off on Monday (June 8) as investors soured on AI-linked names. The slide followed the U.S. tech-heavy Nasdaq dropping more than 4.5% last week.

South Korea's Kospi plunged as much as 8% at the open, dragged by its two heaviest names. Samsung Electronics and SK Hynix make up over 40% of the index.

Samsung Electronics ended Monday's session down 10.18%, while SK Hynix fell 7.68%. The two memory chip giants each crossed a $1 trillion valuation last month, according to CNBC.

The weakness spread well beyond Korea into other major chip markets. Taiwan's TSMC slipped 2.96%, while Hon Hai Precision, known as Foxconn, dropped 5.27%.

Japanese tech investor SoftBank Group plunged 6.1% during the session. Tokyo Electron and Advantest fell 7.45% and 5.72% respectively, per CNBC.

European chip stocks followed their Asian peers lower in early trading. ASML, Infineon, STMicroelectronics, ASM International and Besi each fell between 3% and 4.5%.

The rout was triggered after Broadcom's fiscal second-quarter revenue missed estimates last week. That miss plunged its shares and cascaded across the wider tech sector, CNBC reported.

The VanEck Semiconductor ETF lost over 9% on Friday as the damage widened. SoftBank's Arm Holdings dropped nearly 13%, while Micron Technology fell more than 13%.

A UOB note on Monday quantified the scale of last week's damage. The tech-led rout erased roughly $1.8 trillion in S&P 500 market cap, UOB said.

Risk-off sentiment was sharpened by expectations that U.S. interest rates stay higher for longer. Goldman Sachs pushed its final two forecast rate cuts back to June and December 2027.

The pressure on Korea predates this week's drop, with foreign investors already retreating in 2026. Overseas investors had unloaded a net 1.24 trillion won, about $801 million, of Kospi shares by Monday.

Many strategists tie the selling to the market's success rather than weak fundamentals. Surging weightings in global benchmarks force active managers to trim positions to stay within limits.

Nomura's Chetan Seth called the outflows mechanical rather than a negative view on Korea. He compared the dynamic to India, where domestic retail buying crowded out foreign investors.

Domestic buyers have more than absorbed the foreign exit so far this year. Man Group's Nick Wilcox pointed to an estimated $70 billion of retail inflows in 2026.

Despite the offloading, several institutions stayed constructive on Korean equities. Goldman Sachs raised its 12-month Kospi target to 12,000 and forecast a further 37% upside.