Seoul: South Korean stocks closed more than 4 percent lower Monday, as artificial intelligence (AI) woes resurfaced amid escalating tensions in the Middle East. The Korean won rose against the U.S. dollar. The benchmark Korea Composite Stock Price Index (KOSPI) plunged 304.33 points, or 4.46 percent, to 6,516.27 points, after falling as low as 6,472.80.
According to Yonhap News Agency, unfavorable factors related to semiconductors and worsening conflict risks between the United States and Iran dampened investor sentiment. Lee Kyoung-min, an analyst at Daishin Securities, commented on the market's decline, highlighting the pressure from both the semiconductor sector and geopolitical tensions.
On Friday, U.S. stocks closed lower, affected by a decline in semiconductors. This downturn was triggered by the latest AI model unveiled by Chinese startup Moonshot, which renewed concerns over global spending on AI infrastructure, including semiconductors. The model, called Kimi K3, unveiled Friday (local time), is considered to deliver performance approaching the most advanced AI models from the U.S.' OpenAI and Anthropic, but at a much lower cost. This raised speculation over whether the massive capital spending from hyperscalers could be justified, adding downward pressure to the stock market, the analyst added.
Also weighing on the KOSPI was escalating tensions in the Middle East, after the U.S. military announced a third U.S. soldier died in Iraq during back-and-forth attacks between the U.S. and Iran. This geopolitical unrest further contributed to the stock market's decline, as investors remained wary of the potential for broader conflict and its impact on global markets.