AI boom cools down, South Korean stock market plunges 5% and triggers a circuit breaker, spot silver falls over 2.5%.

AI trading enthusiasm suddenly cooled down, global tech stocks experienced large-scale sell-offs, and the strong rally driven by AI narrative since the beginning of this year is facing its first severe test.

The Korean Composite Stock Price Index dropped 5.3% under pressure, triggering the circuit breaker mechanism—this index has been the best-performing major stock benchmark globally this year and is an important barometer for global AI investment. Chipmaker SK Hynix fell 8.9%, Samsung Electronics slid nearly 7%. Meanwhile, Nasdaq 100 index futures fell 1%, indicating the index is set for its third consecutive day of declines; MSCI Asia stock index dropped 1.6%.

Broadcom's forecast for AI chip sales came in less optimistic than market expectations, directly triggering this round of sell-off. Broadcom shares slumped more than 12% on Thursday, marking the largest single-day drop in nearly 16 months, and the decline spread to the entire semiconductor sector.

Market attention has now shifted to the U.S. non-farm payroll data for May to be released on Friday. This report will directly influence investors’ expectations for the Federal Reserve’s policy path and determine whether the AI-driven market rally can regain momentum after this round of consolidation.

South Korean stocks plunged 5.3%, triggering the circuit breaker; SK Hynix fell 8.9%, Samsung Electronics slid nearly 7%.Nasdaq 100 index futures fell 1%, indicating the index will post its third consecutive day of declines.European stock index futures dipped just 0.1%, benefiting from the region’s relatively limited exposure to the tech sector.U.S. 10-year Treasury yield was little changed at 4.47%.The dollar spot index stayed largely unchanged.The Korean won continued its decline, hitting its lowest point against the U.S. dollar since 2009.Spot gold fell 0.6% to $4,447.36 per ounce.Spot silver dropped below $72/oz, down more than 2.5% on the day.Brent crude oil edged up to $95.50 per barrel.Bitcoin fell 1.1%, trading at $62,879.26.

South Korea Bears the Brunt, Japan Under Pressure As Well

This year the KOSPI overtook India to become the world’s sixth largest stock exchange, and set a record for the best annual gains among major global markets. However, this leap means that its pullback has a multiplied impact on global markets. Garfield Reynolds, head of Bloomberg Markets Live team, pointed out that the Seoul market’s drop is dragging down global risk sentiment; Korea’s influence on global markets has soared along with its rally this year, and this reversal is unlikely to offer much relief to investors elsewhere.

Japanese tech stocks also suffered clear losses. Tokyo Electron and Advantest dropped over 6% and 5%, respectively; Murata Manufacturing fell 4.8%, Fanuc dropped 4.1%. TSMC bucked the trend and rose 0.4%, one of the few bright spots. In contrast, European stock index futures dipped just 0.1%, benefiting from relatively limited tech sector exposure.

The key trigger for this sell-off came from Broadcom. The company reported second quarter revenue below expectations, and gave forecasts for AI chip sales lower than market estimates. Although Broadcom has made progress transforming its customer base towards AI, it still cannot meet investors’ highly optimistic expectations. Broadcom shares plunged more than 12% on Thursday, marking the biggest drop in nearly 16 months.

AI Bubble Concerns Rekindled, Profit-Taking Rotation Accelerates

As Broadcom’s results disappointed the market, concerns over an AI bubble resurfaced. Billionaire investor Ray Dalio earlier this week warned that the current market is showing signs of a boom that may ultimately collapse.

Nick Twidale, chief market analyst at AT Global Markets, said: "After Broadcom's results, AI bubble worries have returned, and the tech sector is under pressure. Today's non-farm payroll data will further amplify risk sentiment swings in the market; this is a reasonable time for taking some profits."

However, some market participants offered comparatively mild interpretations for this adjustment. Vey-Sern Ling, managing director at Union Bancaire Privée, said: "Given the unprecedented speed and intensity of the AI rally recently, some degree of consolidation was long overdue. Broadcom’s 'miss' provides investors with heavy unrealized gains a rational opportunity to take profits. This is a healthy correction, and will not shake the longer-term investment logic." Ortus Advisors equity strategist Andrew Jackson shared a similar view, believing that for winners who have recently seen sharp gains, a correction has been long overdue and remains very necessary for recalibration.

Non-farm Payroll Data Is Friday’s Biggest Variable

The next key event for the market is the U.S. non-farm payroll report for May, to be released at 8:30 a.m. ET Friday. According to a Bloomberg survey of economists, market expects non-farm payrolls to increase by 85,000, a three-month low, with the unemployment rate expected to remain unchanged at 4.3%.

San Francisco Fed President Mary Daly said monetary policy is currently at a suitable place, but the outlook remains highly uncertain. Tom Essaye of Sevens Report said that although the Iran-Israel conflict and the AI narrative continue to dominate the market, the jobs report is equally critical. He cautioned: "If the labor market is too tight, it increases the probability that the Fed will raise rates earlier than expected." Treasury traders are widely betting the Fed will hike rates in the next 12 months; if jobs data comes in below expectations, it would significantly impact those positions, and U.S. Treasuries are maintaining the prior session’s gains.

Other Markets: Oil Slightly Rebounds, Gold Under Pressure, Asian Currencies Diverge

In other markets, Brent crude oil rose slightly to $95.50 per barrel, recovering partly from declines triggered by optimism over a ceasefire between Israel and Lebanon and expectations this could encourage broader U.S.-Iran diplomatic breakthroughs. Gold fell near $4,440 per ounce due to uncertain outlook for Iran-Israel negotiations. The dollar traded in a narrow range versus G10 currencies as market awaits non-farm payroll data to gauge Fed rate path.

Among Asian currencies, the Korean won continued to fall, reaching its lowest point since 2009 against the U.S. dollar. The Indonesian rupiah was trading near historic lows amid large foreign withdrawals from Indonesia’s bond and stock markets, while the Indian rupee climbed against the trend after the Reserve Bank of India unveiled measures to promote capital inflows.

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