South Korean equities suffered a sharp decline of more than 4 percent on Thursday, driven by broad losses in technology shares as concerns over the profitability of artificial intelligence spending continued to unsettle investors. The Korean won strengthened slightly against the US dollar.

The benchmark Korea Composite Stock Price Index (Kospi) plunged 4.58 percent, or 301.88 points, to close at 6,296.38, having dipped as low as 6,238.32 during the session. The drop came despite consecutive gains earlier in the week — the index had climbed 1.62 percent on Tuesday and 3.76 percent on Wednesday, buoyed by easing anxieties over AI profitability.

The Kospi opened 1.81 percent lower and steadily widened its losses through the morning. At 10:18 a.m., the exchange operator activated a sell-side sidecar for five minutes, temporarily halting program trading for all Kospi-listed shares. The sidecar is an emergency circuit breaker triggered when Kospi 200 futures move more than 5 percent, designed to cool panic-driven algorithmic selling.

Trading volume was light, with 281.8 million shares changing hands for a total value of 25.9 trillion won ($18.2 billion). Advancing issues outnumbered decliners 489 to 380.

Foreign investors sold a net 3.33 trillion won worth of stocks, and institutional investors offloaded a net 121.8 billion won. Retail individuals absorbed the selling, purchasing a net 3.34 trillion won.

Overnight on Wall Street, investors unloaded Nasdaq-listed tech heavyweights such as Alphabet and Advanced Micro Devices, dragging the tech-heavy index down 0.83 percent amid doubts about the returns on large-scale AI infrastructure investment. Conversely, signs of de-escalating tensions in the Middle East lifted the Dow Jones Industrial Average 0.49 percent to a new all-time high.

"Despite improvement in geopolitical and macroeconomic conditions, the Kospi lost momentum due to losses in US chip stocks and profit-taking," said Han Ji-young, an analyst at Kiwoom Securities, noting that investors are still seeking stronger evidence that massive AI spending will translate into growth.

"However, investors' concerns over AI spending seemed to have already peaked following recent earnings reports by big tech companies," Han added.

Semiconductor stocks led the decline. Samsung Electronics, the world's largest memory chipmaker and the single biggest Kospi component by market capitalization, tumbled 6.3 percent to 203,500 won, while SK hynix, the leading global supplier of high-bandwidth memory used in AI accelerators, plunged 10.37 percent to 1.5 million won. SK Square, the parent company of SK hynix, nosedived 13.32 percent to 970,000 won, and Samsung Electro-Mechanics, an electronics component affiliate of Samsung Electronics, slumped 9.37 percent to 1.23 million won. Because Samsung Electronics and SK hynix together account for a disproportionately large share of the Kospi's weighting, sharp moves in their share prices tend to amplified broader index swings.

Shipbuilders also traded lower. Industry leader HD Hyundai Heavy Industries dipped 0.39 percent to 507,000 won, and Hanwha Ocean shed 1.31 percent to 90,700 won. Major retailer Hyundai Department Store sank 3.36 percent to 106,400 won, and leading brokerage Samsung Securities fell 2.25 percent to 95,400 won.

Bucking the broader downtrend, defense giant Hanwha Aerospace rose 4.67 percent to 1.05 million won, and pharmaceutical leader Samsung Biologics gained 1.54 percent to 1.51 million won.

The Korean won was quoted at 1,423.8 won against the US dollar as of 3:30 p.m., up 0.7 won from the previous day's stock market close. (Yonhap)