AI Mania Shows First Cracks? Korean Stocks Hit by "Black Friday," Key Support in Jeopardy

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The world’s most crowded AI trade is undergoing a severe stress test. The Korean Composite Stock Price Index (KOSPI) suffered its worst single-day fall of the year on Friday, with AI chip giant SK Hynix plunging nearly 10% overnight.

KOSPI faces a life-or-death test around the 8,000-point mark—this level is simultaneously the lower boundary of the upward trend channel, the area of the 21-day moving average, and the spot where it broke above previous highs in mid-May. If this support breaks, the global AI rally could quickly transform from the hottest trade into its biggest risk source.

Data from LSEG Workspace shows that each major KOSPI selloff this year has often been followed by a pullback in the Nasdaq 100 Index (NDX), with their close linkage clearly evident. KOSPI has become the most concentrated and extreme vehicle for expressing the global AI narrative. As this market wavers, global investors must confront a fundamental question: The validity of the long-term AI theme has never been the main controversy; the real issue is whether market expectations have already gone too far, too fast.

Bulls have not yet been defeated. KOSPI remains above the 21-day moving average, Goldman Sachs maintains an aggressive bullish stance, and earnings forecast revisions are still heading upwards. But the market is undergoing a true test, and the outcome will become clear in the coming days.

KOSPI: 8,000 points, the bulls' last line of defense

KOSPI recorded its largest single-day drop in recent times on Friday. Although the short-term uptrend since the April low has not been technically broken, pressure is imminent.

8,000 points is currently the most critical support area, its importance underscored by three overlapping dimensions: It is the lower boundary of the upward trend channel, the current position of the 21-day moving average, and the reference point for the breakout above the previous high in mid-May. For bulls, this area must be defended or the trend will officially reverse. Notably, the 50-day moving average is significantly lower than current prices, meaning if the trend breaks, downside risk is considerable.

Meanwhile, Korea’s volatility index remains at extreme levels; implied daily volatility in the options market is about 4.5%, showing the market has already priced in considerable recent turbulence.

SK Hynix: Gap-filled, downside risk not to be underestimated

Finding new superlatives for SK Hynix is becoming increasingly difficult. The stock plunged nearly 10% in a single session Friday—a scenario almost unimaginable weeks ago.

Despite the plunge, SK Hynix’s price remains above the rising 21-day moving average, with the 50-day moving average much lower. But what truly worries bulls is the numerous upward gaps left behind during the previous parabolic surge. The market rarely leaves so many permanent gaps— even if only partially filled, the losses for investors who chased the rally would be substantial.

KOSPI’s current rally harbors a significant structural risk. According to TS Lombard data, virtually all of the index’s gains have been contributed by two companies. This extremely concentrated market capitalization distribution means that if core components come under pressure, the impact on the index will multiply, and the actual effect of diversification as a hedge will be greatly diminished.

Korean stocks and Nasdaq: The global AI sentiment transmission chain

KOSPI has become the most aggressive amplifier of the global AI theme. LSEG Workspace data shows that each sizable KOSPI decline this year has typically triggered a synchronous pullback in the NDX, with their linkage highly significant.

The logic behind this transmission effect is clear: fluctuations in global AI sentiment are increasingly signaled by moves in the Korean market. If KOSPI breaks a key technical support, investors should be highly vigilant when assessing other AI-related exposures—the turmoil in the Korean market is never just a regional event.

Goldman Sachs maintains bullish call, target raised to 12,000 points

Amid market shaking, Goldman’s stance remains clear. Goldman upgraded Taiwan stocks to overweight and raised the KOSPI target price to 12,000 points, implying about 37% upside from current levels.

Goldman admits Korean stocks have more than doubled this year, creating correction risk, but believes three factors continue to underpin the bullish logic: ongoing upward revisions of earnings forecasts, an undervalued memory chip cycle tailwind, and a forward P/E ratio of 8.2.

The scale of funds chasing the Korean market is now enormous. Extreme levels of crowding have always been a key precursor to a turning point — not because the trend must end, but because any negative shock could trigger a chain of deleveraging.

Risk Warning and DisclaimerThe market carries risks; investment should be cautious. This article does not constitute personal investment advice and does not consider the unique investment objectives, financial circumstances, or needs of individual users. Users should assess whether any opinions, views, or conclusions herein are suitable for their own circumstances. If you invest based on this, you do so at your own risk. ```