South Korea and Taiwan have lost significant ground in global stock market rankings after experiencing severe sell-offs driven by artificial intelligence capital expenditure concerns. South Korea has fallen to tenth place from fifth position in the first week of June, with its market cap declining 26.8% over the past month to $3.4 trillion. Taiwan has slipped to seventh spot from sixth position, with its market cap dropping 15% to $4.4 trillion in the same period. This dramatic reversal comes after both countries had soared past India in market capitalization at the beginning of June, with South Korea briefly reaching over $5 trillion before the current decline. In contrast, Indian equities have shown resilience, with the Sensex posting a modest gain of 0.6% over the past month, maintaining India's sixth position in global rankings with a market cap of $5.1 trillion.
South Korea's stock market has experienced its worst month in history, with the KOSPI plunging more than 33% in July and closing at 5,593.56 on Thursday, down another 1.23% after a 5% morning rebound faded. This collapse surpasses the October 1997 IMF crisis, when the index lost 27%, and the October 2008 global financial crisis at 23%. The index had more than doubled in the first half of 2026, gaining 116% at its peak and hitting an all-time high of 9,385.59 in June, briefly making South Korea the world's sixth-largest stock market. Circuit breakers halted trading on July 28 and 29, the first time they fired on consecutive sessions, with the two days erasing 864.5 trillion won and prompting an emergency meeting of South Korea's top financial authorities. The latest fall has reduced the year-to-date gain in South Korean equities to 27% from 87% at the beginning of June when the country's market cap had peaked at over $5 trillion.
Asian equity markets experienced a severe crash on Wednesday, with South Korean shares plunging nearly 6% led by chip maker SK Hynix and tech giant Samsung, which dominate the market there. The sell-off was so severe that trading on South Korea's stock market had to be halted during the session. This represents a dramatic escalation from the previous session's recovery, where markets had regained ground after severe drops attributed to concerns over valuations, AI investments, and intensified market competition. The latest bout of nerves is being caused by news that chip giant Nvidia is investing three-quarters of a trillion dollars to help fund artificial intelligence infrastructure projects, sparking fresh fears of an AI investment bubble. For the South Korean market, concern over a possible tax on unrealized capital gains was another major factor in the market crash, according to The Economic Times.
NVIDIA is pursuing AI deals worth more than $750 billion, raising significant concerns about circular financing that could artificially inflate chip demand. The company is working on a fresh round of AI deals that strengthen its role as a financer of the infrastructure and companies driving the AI revolution. Last week, NVIDIA and South Korea's SK Group unveiled a more than $500 billion AI initiative spanning large-scale AI data centres and next-generation memory, while the company is also in talks to provide up to $250 billion in financing to help OpenAI lease computing power from a US data centre project. Additionally, NVIDIA is in discussions to finance $350 billion of OpenAI's purchases of its chips for the US project, according to Bloomberg reports. **On Monday, the chipmaker announced a "substantial" investment in Safe Superintelligence", founded by former OpenAI chief scientist Ilya Sutskever, with Nvidia committing $5 billion to the startup.
Market experts are raising serious concerns about the circular nature of these financing deals, where Nvidia invests in or finances companies that ultimately buy its own chips. Viram Shah, Founder & CEO of Vested Finance, explains that while Nvidia buying stakes in AI companies is normal investing, the current structure involves Nvidia agreeing to guarantee someone else's loan, creating fundamentally different exposure levels. The scale is striking - Nvidia's own filings show about $3.5 billion in guarantees today, while the figure being discussed for this project is $250 billion. Shah warns that "the fair reading is that it hasn't been round-tripping so far, but the new structure moves in that direction." Lending market signals are already showing warning signs - lenders' insurance costs on Nvidia's debt have roughly doubled since November, with the biggest single-day jump on record this Monday, while Nvidia's stock fell about 5% on Monday.
Technology stocks displayed mixed performance during the trading session, with SK Hynix's impressive earnings briefly steadying Asian chipmakers, pivotal players in this year's AI-led rally but currently facing investor skepticism. However, the semiconductor selloff deepened significantly, with the sector's benchmark index falling into bear market territory, representing a 4.5% decline that offset gains in other sectors. Companies including Cambricon Technologies, Zhongji Innolight, and Eoptolink Technology posted solid gains, providing support to the broader market. Conversely, shares of SMIC, Hygon Information Technology, and Victory Giant Technology continued to decline as investors remained concerned about high valuations and AI-related spending patterns. Technology stocks bucked the broader European advance, with chip equipment maker ASML falling further as concerns persisted over the durability of AI-led capital spending and rising competition from Chinese semiconductor manufacturers. Finance Minister Koo Yun-cheol conceded the leveraged products deserved closer scrutiny before launch, stating "We've already put in place a package of measures, but if it's needed we'll introduce additional steps to help normalise the market."
