South Korea's Kospi Whipsaws on AI Chip Swings as Inflation Climbs

South Korea's stock market experienced dramatic volatility at the start of July, underscoring how heavily the benchmark Kospi has come to depend on the artificial-intelligence-driven semiconductor trade. The index tumbled about 7.9% on Thursday to its lowest level in more than three weeks, as heavyweight chipmakers such as Samsung Electronics and SK Hynix led losses amid a global selloff in AI-related technology stocks and concerns over the sustainability of AI spending. It then rebounded roughly 5.8% the following session, recovering much of the drop as bargain hunters returned and softer US jobs data revived hopes of Federal Reserve rate cuts, lifting global risk appetite. The swings followed a powerful rally that had lifted the index sharply this year. Adding to the policy backdrop, South Korea's annual inflation rate accelerated to 3.2% in June, its highest since late 2023, reinforcing expectations that the Bank of Korea may keep a relatively tight stance. The combination of a chip-concentrated market and firmer inflation highlights the delicate balance facing investors and policymakers in an economy increasingly tied to global technology demand.