Key insights
- Broadcom's weaker-than-expected AI chip forecast triggered a significant sell-off in South Korean semiconductor stocks like Samsung Electronics and SK Hynix, which heavily influence the iShares MSCI South Korea ETF. This decline, coupled with foreign investor outflows and concerns over market liquidity ahead of major IPOs, signals potential headwinds for global tech sentiment and broader equity markets. The broad impact on the semiconductor index and subsequent contagion to the KOSPI suggests a negative read-through for tech-heavy indices globally.
Investing.com -- The iShares MSCI South Korea ETF fell 7.7% in morning trading after Broadcom issued an AI semiconductor revenue forecast for its third fiscal quarter of approximately $16 billion — roughly 7% below market expectations of $17.2 billion — and a full-year AI chip guidance figure of $56 billion that also fell short of consensus. The core trigger for the sharp decline stems from Broadcom’s post-market earnings report, in which the company guided for AI chip sales of $16 billion for the third fiscal quarter of 2026 — a figure that, despite representing more than 200% year-on-year growth, came in approximately 7% below the market estimate of $17.2 billion, with full-year AI chip revenue guidance of $56 billion also falling short of the expected $57.6 billion. Broadcom shares plummeted more than 15% in after-hours trading, triggering a 5.45% plunge in the Philadelphia Semiconductor Index, with panic quickly spreading across markets — and due to the high weighting of semiconductor stocks, the KOSPI became one of the first indices to come under pressure.
The two most consequential casualties in Seoul were Samsung Electronics, which fell 6.40%, and SK Hynix, which dropped 9.92%. Samsung Electronics and SK Hynix together make up roughly 44% of EWY’s portfolio, meaning their sharp declines had an outsized and direct impact on the ETF’s net asset value. Foreign investors were net sellers of 4.3 trillion won ($3.12 billion) on the main board on June 5, and have sold a net 27 trillion won ($19.6 billion) over the past six trading sessions. Cash hoarding and an outflow of global liquidity ahead of the $2 trillion SpaceX IPO, along with future listings by OpenAI and Anthropic, added to weakness in the KOSPI and stoked concern over a downturn driven by tighter market liquidity.
The KOSPI sank more than 5% on June 5 as renewed concern over U.S. semiconductor earnings triggered a sharp correction in Seoul, with the benchmark closing at 8,160.59, down 5.54%. The KOSPI plunged over 6% at one point during the Asian session, triggering a circuit breaker after KOSPI 200 futures fell 5%, following Broadcom’s weaker-than-expected AI chip sales guidance. The KOSPI’s 5.54% drop was steeper than declines in other major Asian markets, with Japan’s Nikkei 225 falling 1.31% and China’s Shanghai Composite losing 0.71%. On Wall Street, the S&P 500 fell 0.9%, the NASDAQ declined 1.5%, and the Dow Jones edged down 0.3%, reflecting broad but more contained risk-off sentiment.
Because the KOSPI had surged on an extreme concentration in chip shares, the correction was steeper than in other major markets, and foreign investors also appeared to be raising cash ahead of large initial public offerings including SpaceX and OpenAI. Broadcom’s earnings showed how little room there is for disappointment when valuations, earnings upgrades, and foreign inflows are all tied to the same AI story — and analysts say the deeper issue for South Korea is structural, as the country has long relied on semiconductors as its primary growth engine, but the AI boom has intensified that dependence to an uncomfortable degree. Together, these forces converged to push EWY to its lowest intraday level of $187.60 today, well below its previous session close of $203.97.
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