AI trading cools down, South Korean stocks plunge 1.8%, spot gold rises 1%, Bitcoin dives.

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Broadcom's disappointing earnings outlook triggered a rapid cooling of global AI trading, with South Korea's KOSPI leading losses in Asia-Pacific markets on Thursday. This abruptly brought to the forefront the bubble risks accumulated from the highly concentrated chip stocks and sharp expansion of leveraged capital this year.

Nasdaq 100 Index futures fell 0.5% after Broadcom plunged 14% in post-market trading. Its latest earnings outlook was far below investor expectations, signaling slower progress in transitioning to AI customers than the market expected. The AI Winners Basket Index under UBS fell 1.4% on Wednesday, ending a four-day streak. The Asian sell-off extended Wall Street's weakness from Wednesday—ending the S&P 500's nine-day rally, with hawkish rate hike signals from Fed officials and renewed US-Iran tensions providing a double blow, further suppressing risk appetite.

According to an article by Wallstreetcn, South Korea’s Finance Minister Koo Yun-cheol, Central Bank Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eog-weon, and Financial Supervisory Service Commissioner Lee Chan-jin held a joint meeting, pledging to take "immediate measures" when necessary to address sharp fluctuations in the foreign exchange market. Meanwhile, officials warned that balances of stock financing loans are at a near 20-year high, highlighting authorities' focus on market stability.

This adjustment affects global assets: Bitcoin slipped to around $64,000, the lowest since February this year; gold rose about 1% as bargain buying flowed in; Brent crude ended its three-day gains after news of a ceasefire agreement between Israel and Lebanon, falling about 1% near $97/barrel; European stocks split between gains and losses, as investors cautiously watched Friday's US nonfarm payroll data.

European stocks opened mixed: Euro Stoxx 50 up 0.13%, FTSE 100 down 0.12%, CAC 40 up 0.10%, DAX up 0.20%.Nikkei 225 closed down 1.4% to 67,470.69 points; TOPIX fell 1.1% to 3,951.85 points; Korea Seoul Composite dropped 1.8% to 8,639.41 points.US Dollar Spot Index showed little change.Japanese Yen rose 0.1% to 159.86 per USDUS 10-year Treasury yield fell 2 basis points to 4.48%Japan’s 10-year yield rose 3 basis points to 2.670%WTI crude fell 0.8% to $95.27/barrelSpot gold rose 1% to $4,479.64/ounceBitcoin fell 0.9% to $64,312.09

Broadcom warning shakes AI nerves; Asia-Pacific markets broadly decline

Nasdaq 100 futures fell 0.5% after Broadcom tumbled 14% post-market, and its latest earnings outlook missed investors' expectations. Broadcom also signaled its AI client shift was slower than forecast, despite being on the right track, facing overheated market expectations. UBS’s AI Winners Basket Index fell 1.4% on Wednesday, ending a four-day gain streak.

Asia's declines extended Wall Street's weakness from Wednesday—S&P 500’s nine-day rally abruptly ended, and renewed US-Iran conflict dampened risk appetite. European markets also faced downward pressure. Bitcoin dropped to around $64,000, its lowest since February. News of a ceasefire agreement between Israel and Lebanon provided some relief, ending Brent crude’s three-day rise as it dropped about 1% to near $97/barrel. Gold rose 0.6% to about $4,460/ounce as bargain buying emerged.

Billy Leung, investment strategist at Global X Management, said, "Chip stocks had rallied substantially ahead of earnings, and investors sitting on profits don’t need much reason to take gains."

Korean authorities hold urgent meeting, clear signals of intervention

KOSPI plunged at Thursday’s open, becoming one of the biggest losers among major Asia-Pacific indices. Although KOSPI is up more than 100% year-to-date and over 200% since June 2025—ranking first among global major indices—the nearly 2% drop that day still drew heavy attention from authorities.

According to Yonhap, Koo Yun-cheol said after the meeting that the government remains highly vigilant to prevent external uncertainties from spreading panic in the market. “(The government) will take immediate measures to respond to excessive market volatility as needed,” he added. Officials believe recent market volatility is closely tied to the ongoing Middle East conflict and continued net selling by foreign investors in Korean stocks. The Finance Ministry stated, “Rapid gains in the Korean stock market brought temporary rebalancing by foreign investors, and profit-taking has exacerbated volatility.”

Officials stressed the fundamentals of Korea’s economy are solid—exports in May surged 53.2% year-over-year, and market capitalization rose to sixth in the world—but also warned that rising stock financing loans could pose potential risks to the economy. They will closely monitor related trends and protect investors’ interests.

Index surges are highly concentrated; structural risks continue to accumulate

KOSPI’s strong performance masks severe divergence among constituents. Of 835 constituent stocks, only 373 have risen this year, less than half; Samsung Electronics and SK Hynix have gained about 200% and 250% respectively and each surpass $1 trillion in market capitalization, together accounting for over 40% of KOSPI’s weight, while over 800 other stocks contributed less than 30% to the index’s gains.

The highly concentrated rally was accompanied by a sharp expansion of leveraged speculative funding. According to Korea Financial Supervisory Service, by Q1 2026, the top ten brokers’ margin loan balances were near 36 trillion KRW, almost double the previous year, marking a 20-year high. Of these, investors aged 50+ accounted for 62.3%, and the 60+ group’s loan balance surged from about 3 trillion to over 8 trillion KRW in one year. In Q1 2026, new securities accounts opened by those under 18 jumped almost tenfold compared to a year earlier.

Data from the Korea Exchange showed the number of temporary suspension directives issued in the main board market has jumped to the highest since the 2008 financial crisis—20 “sidecar” program trading suspensions were issued this year, only 6 fewer than the 26 in all of 2008. Under the rules, when KOSPI 200 futures move by 5% or more for at least one minute, algorithmic trading is paused for five minutes.

Wall Street divided; bubble warnings rise

Amid KOSPI’s rapid surge, Wall Street’s main institutions are clearly split. Goldman Sachs raised its KOSPI target from 9,000 to 12,000, saying the rally in AI chip makers’ stocks may continue but warning that the risk of a correction is rising; its Asia Pacific chief equity strategist Timothy Moe noted, “We prefer North Asia, which offers the strongest earnings growth.”

Citi warns Korean equities are highly valued among global markets and combined with institutional risks in labor relations, foreign capital’s long-term allocation willingness may be dampened, viewing the rally as mainly driven by short-term sentiment. The global CIO of Standard Chartered pointed out that Korea is now a “crowded trade” and downgraded semiconductors from “overweight” to “neutral,” deeming a short-term correction entirely reasonable.

Billionaire and Bridgewater founder Ray Dalio said on Bloomberg TV, “All great technological revolutions create bubbles.” Rob Marshall Lee, founding partner and CIO of Cusana Capital, was more blunt: “The Korea market is a huge bubble.” He pointed to most Korean firms’ extremely low ROE and said the AI age won’t bring fundamental changes; he warned when the cycle reverses, relevant firms’ profit margins could plunge from 70% to negative. “In the short term, I wouldn’t short; but over five years, you’ll likely lose a lot of money,” he said.

Fed’s hawkish signals strengthen; macro pressures keep rising

Hawkish comments from Fed officials also cooled market sentiment. Dallas Fed President Lorie Logan said policymakers may need to raise rates later this year to bring inflation back to target; New York Fed President John Williams told Yahoo Finance there’s still uncertainty in the rate outlook.

According to Bloomberg, recent data showed US firms added the most jobs since January 2025, suggesting that hiring remains strong despite rising energy costs. If Friday’s nonfarm payrolls confirm this, expectations of Fed rate hikes will further strengthen. US 10-year Treasury yields slipped 2 basis points to 4.48% Thursday after previously surging due to high oil prices and resilient labor markets. Investors will also get weekly initial jobless claims data Thursday to further assess the job market.

Forex.com analyst Fawad Razaqzada said, “If US economic data keeps exceeding expectations, investors may bet on a stronger dollar to express more hawkish Fed views, especially versus yen, gold, and other low or zero-yield assets.” Meanwhile, Bloomberg reported, citing sources, that BOJ officials are considering a 25 basis point rate hike this month and assessing further hikes this year, pushing the yen stronger against the dollar Thursday.

Risk warning and disclaimerThe market involves risk; investment should be made cautiously. This article does not constitute personal investment advice nor considers the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article apply to their own situation. Investment based on this is at your own risk. ```