Seoul: South Korean stocks plummeted more than 4 percent Wednesday amid escalating tensions between the United States and Iran and a tech slump fueled by concerns over the valuation of stocks related to artificial intelligence (AI). The benchmark Korea Composite Stock Price Index (KOSPI) shed 366.11 points, or 4.52 percent, to close at 7,730.82, almost eclipsing most of the over 8 percent surge from the previous day. At one point, the index fell as low as 7,541.11.
According to Yonhap News Agency, the sharp decline prompted the Korea Exchange to activate a sell-side sidecar for the index at 1:16 a.m., halting program trading for five minutes. The KOSPI's loss was driven by resurfacing tensions in the Middle East after the U.S. struck Iran in retaliation for the shooting down of an American Apache helicopter in the Strait of Hormuz, which was followed by Tehran's counteraction.
Additionally, the risk-on appetite was dampened by an overnight tech slide on Wall Street, triggered by concerns over the valuation of AI stocks. This was exacerbated by the news that Crusoe Energy Systems, a data center developer, suspended one of its projects at the request of an unidentified big tech customer. The tech-heavy Nasdaq composite closed 0.97 percent lower, and the S and P 500 dropped 0.26 percent, while the Dow Jones Industrial Average saw a slight rise of 0.17 percent.
Major tech shares led the market decline, with Broadcom losing 1.12 percent, Apple sliding 3.64 percent, Micron falling 1.4 percent, and Nvidia down 0.2 percent. Investors are now turning their attention to the upcoming release of the U.S. Consumer Price Index, which could provide further insights into the U.S. Federal Reserve's monetary policy amid speculation of a hawkish pivot. The initial public offering of SpaceX later this week is also on the radar.