KOSPI Tumbles 4.77% on Chip Rout as Alphabet's AI Bill Stings

South Korea's benchmark KOSPI declined 4.77% from its Thursday close to 5,654.61 by 10:40 a.m. local time on Friday. The drop followed a 12.64% slide in Alphabet shares after the Google parent's capital spending more than doubled.

Over the same period, Japan's Nikkei 225 fell 2.81%, making the KOSPI's decline roughly 1.7 times steeper. Samsung Electronics and SK Hynix bore the brunt of the selling, just days after both chipmakers reported record profits.

Alphabet's AI Expenditure Hits Seoul's Chip Stocks

Alphabet faced challenges beyond its spending. Its third-quarter revenue increased 25% year over year to $127.6 billion, slightly below the $127.93 billion analysts had expected.

Capital expenditure reached $51.4 billion, up 114% from a year earlier. That pushed free cash flow to negative $9.1 billion. Alphabet also said it expects capital spending to rise significantly in 2027.

Investors responded with the stock's worst post-earnings drop in 22 years. That reaction spilled over into Seoul's semiconductor shares on Friday.

Samsung shares fell 6.25% at the time of writing, while SK Hynix declined 8.91%. SK Hynix had earlier this week posted record quarterly sales of 104.6 trillion won.

Larger data center budgets typically translate to more memory chip orders for both companies. Instead, investors focused on whether Alphabet can sustain such spending given its negative cash flow.

The sell-off also triggered a sell-side sidecar. The Korea Exchange halted program selling at 10:04 a.m. for five minutes. That was the first sell-side halt in 11 trading days, coming three days after a buy-side pause.

Stock markets in Tokyo and Taipei also fell on Friday, but by smaller margins.

Two Chip Giants Separate Seoul from Regional Peers

In Japan, the Nikkei had risen 1.1% on Thursday after Advantest raised its full-year forecast. Friday's 2.81% loss erased that gain and more.

Taiwan's TAIEX dropped 2.80% from its previous close to 45,069.51 by 9:53 a.m. local time. China's CSI 300 slipped 0.83%.

South Korea's steeper decline is due to the heavy weighting of two companies in its index. Samsung's common and preferred shares and SK Hynix made up 50% of KOSPI market value, based on their average weight from October 19 to 23, according to Korea Exchange data.

Based on those weights, the two stocks' declines accounted for about 3.7 percentage points of the KOSPI's 4.77% loss.

The index's future direction depends largely on whether chip earnings hold up. Two global banks cut their KOSPI targets this week, though both still see room for gains from Friday's level.

Goldman Sachs lowered its 12-month target to 9,000 from 12,000. The bank said chip valuations already imply a 65% fall in 2027 sector earnings, a view it called excessively pessimistic.

UBS trimmed its target to 7,500 from 8,000 on Thursday. Even that lower target sits about 33% above where the KOSPI traded at 10:40 a.m. on Friday.