Dealers work at the trading room of Hana Bank's headquarters in Seoul on Monday, as a circuit breaker was triggered on the Kospi amid a sharp market selloff. [Yonhap]
Dealers work at the trading room of Hana Bank's headquarters in Seoul on Monday, as a circuit breaker was triggered on the Kospi amid a sharp market selloff. [Yonhap]

Samsung Electronics and SK Hynix each tumbled more than 10% at the open Monday as a wave of semiconductor selling from the United States swept into South Korea's two largest stocks by market capitalization, triggering a circuit breaker on the Kospi. Single-stock leveraged exchange-traded funds tied to the two companies — facing their first major selloff since listing — shed roughly 20% in early trading.

Leveraged products carry a "negative compounding effect," meaning sharp declines are difficult to recover from. When a security swings repeatedly up and down, leverage steadily erodes the principal.

According to Korea Exchange, Samsung Electronics opened Monday at 293,000 won (about $190), down 10.94% from the previous session's close of 329,000 won. SK Hynix opened at 1,856,000 won, down 10.34% from the prior close of 2,070,000 won.

The selloff in South Korea's major semiconductor stocks reflected the shockwave from a broad US technology selloff. On June 5 local time, the Nasdaq tumbled 4.2% and the Philadelphia Semiconductor Index fell 10.3%. Broadcom's earnings and AI semiconductor outlook came in below market expectations, dragging Nvidia, Micron, AMD and other AI chip stocks lower. A stronger-than-expected US jobs report added to interest rate concerns, amplifying profit-taking pressure across richly valued technology stocks.

The sharp pullback is notable as the first steep reversal following a three-month AI semiconductor rally. Measured from Monday's opening prices, Samsung Electronics was down 18.72% from its intraday high of 360,500 won reached June 2, while SK Hynix was off 21.46% from its peak of 2,363,000 won hit June 1.

The plunge in the underlying stocks fed directly into single-stock leveraged ETF prices. Five leveraged ETFs tracking twice the daily return of Samsung Electronics shares fell as much as roughly 22% in early trading. Two leveraged ETFs tracking twice the return of Samsung Electronics futures dropped as much as about 24%. A leveraged ETF tracking twice the daily return of SK Hynix shares also fell around 20% at the open.

Over a three-month horizon, however, cumulative gains remain substantial. Compared with early March, Monday's opening prices still represented gains of 50.18% for Samsung Electronics and 97.66% for SK Hynix. That context underpins the view that Monday's drop should not be read solely as a sign of deteriorating memory chip fundamentals. Analysts say the move has the character of a price shock in which the US-led semiconductor correction, short-term overbought conditions and profit-taking pressure all hit simultaneously.

Separately from the share price decline, securities analysts raised their earnings outlooks. NH Investment lifted its target price for Samsung Electronics by 40,000 won to 530,000 won Monday, citing signals from Computex 2026 that the AI investment cycle is broadening from graphics processing units to central processing units and memory chips.

NH Investment analyst Ryu Young-ho said the spread of agentic AI is driving growing demand for inference workloads — the processing of real tasks — which will require more DRAM per server. He estimated that the DRAM capacity needed in a single AI inference server could more than double that of a conventional general-purpose server. That dynamic would boost demand for general-purpose DRAM while also widening the price gap between HBM and standard memory, strengthening the case for HBM price increases in 2027.

NH Investment projected that Samsung Electronics' Device Solutions division would again lead earnings in the second quarter, with rising DRAM and NAND prices supporting second-quarter sales of 168.2 trillion won and operating profit of 84.6 trillion won.


kacew@heraldcorp.com