The iShares Korea ETF (EWY) Dropped 14% in Its Most Brutal Session in Six Years, and It Started With Broadcom

If you owned iShares MSCI South Korea ETF (NYSEARCA:EWY) on Friday morning, you had a roughly $204 share by the closing bell that was worth $175.19, a roughly 14% single-day decline that, by intraday magnitude, was the fund’s worst session since the March 2020 COVID crash. A $10,000 position opened at Thursday’s close was worth somewhere near $8,590 by Friday’s. A $100,000 position lost about $14,000 in a single session. The fund is still up 80.2% year to date and 174% over the trailing twelve months, so the drawdown is a regime-test move rather than a thesis-breaking one, and the regime is the AI memory cycle.

The Two Stocks That Are the ETF

EWY tracks the MSCI Korea 25/50 Index at a 0.59% expense ratio, which sounds like a diversified South Korea bet until you look under the hood. Samsung Electronics and SK Hynix together account for roughly 42% of the underlying index. When those two names move in the same direction on the same day, the ETF moves with them, and on Friday they did. Samsung fell roughly 6%. SK Hynix fell nearly 10%. The KOSPI dropped 5.54% and triggered a circuit breaker on KOSPI 200 futures. Foreign investors pulled roughly $1.21 billion out of Korean equities in a single session, which is the part that turned a bad day into a historic one.

The KRW did not help. At 0.00064716 USD per KRW as of June 5, the won continued its drift weaker, and for a dollar-denominated investor in EWY, that is a second layer of pain stacked on top of the equity drawdown. A 9.92% local-currency loss in SK Hynix becomes something worse once you translate it back into the dollars sitting in your brokerage account.

Why It Broke This Week

The selloff was a two-step. Step one was Wednesday evening. Broadcom (NASDAQ:AVGO | AVGO Price Prediction) reported a quarter that, on its face, looked fine. Q2 revenue of $22.187 billion, up 47.9% year over year. Non-GAAP EPS of $2.44 against a $2.3972 consensus. AI semiconductor revenue of $10.80 billion, up 143%. CEO Hock Tan said on the call that "Q2 semiconductor revenue from AI of $10.8 billion grew 143% year-over-year, above our forecast, driven by increasing demand for custom AI accelerators and AI networking." The problem was the guide. Broadcom told investors to expect ~$29.4 billion in Q3 revenue with AI semi revenue around $16.0 billion, against a whisper closer to $17.2 billion. Tan also acknowledged that Google may diversify its custom-silicon suppliers. AVGO fell about 8% on Friday alone, finishing the week down roughly 14%. That was the first quantitative hint that hyperscaler chip orders may not be uncapped after all, which is the foundational assumption underwriting every memory, networking, and accelerator name on the planet.

Step two arrived Friday morning. May payrolls came in at 172,000 against an 80,000 consensus, which is the kind of print that revives rate-hike conversation and punishes anything trading on duration. The 10Y-2Y Treasury spread compressed to 0.38%, its lowest level in 12 months, down from 0.49% a month earlier. Growth-sensitive cyclicals and emerging markets got the worst of it. NVIDIA (NASDAQ:NVDA) fell 6.20%. Micron Technology (NASDAQ:MU), the closest US analog to SK Hynix in the HBM stack, fell roughly 13%. Korea, which trades the AI memory thesis more concentratedly than any other major equity market, fell hardest of all.

The Mechanism Worth Naming

The reason EWY can do this is the reason it ran so hard in the first place. SK Hynix is the dominant qualified HBM3e supplier to NVIDIA’s accelerators. Samsung is the giant trying to catch up. Micron is the third leg of the global HBM supply triangle, and its most recent quarter showed Q2 FY26 guidance of $18.70 billion in revenue and non-GAAP gross margin of 68%. That kind of margin profile only exists when demand is structurally tight and pricing power is real. When Broadcom guides AI semi to $16.0 billion in Q3 (over 200% YoY growth) and the market reads that as a deceleration rather than a victory, the read-through to memory is immediate. If accelerator demand is bounded, HBM attach is bounded. If HBM attach is bounded, the entire Korean equity tape, which is roughly two stocks in a trench coat, gets repriced.

This is a story about the AI infrastructure curve, in other words, told through the most concentrated public vehicle anyone has built to express it.

What Has To Be True for a Repeat, and What Has To Be True for a Bounce

The honest forward look here is mixed, and the things that would tip it are observable rather than vibes. Three concrete items to watch.

The first is Samsung’s HBM3e qualification status with NVIDIA’s Blackwell platform. SK Hynix is already qualified; Samsung is still pending. A Samsung qualification announcement opens a second source of supply and expands Korean memory’s revenue base. A continued delay concentrates risk on a single vendor and keeps EWY trading like one stock. The second is the Bank of Korea’s next monetary policy meeting and any FX intervention commentary, because at current KRW levels, any verbal or actual intervention will move EWY mechanically even if Samsung and SK Hynix do nothing on the day. The third is whether Broadcom’s Q3 actual print, when it lands, beats the $16.0 billion AI guide. Tan has a history of doing exactly that. Eight consecutive EPS beats suggests the guide functions as a floor. If the print clears $17 billion, the "hyperscaler orders are capped" narrative that did the damage on Friday will struggle to survive the following Monday.

Reddit, for what it is worth, was bullish on EWY heading into the drop. The driving post in r/stocks across June 1-3, titled "South Korea overtakes India as world’s sixth-largest stock market," carried a sentiment score of 70 on June 2 and was still picking up upvotes when the floor gave way. That is usually how these things go. The crowd is most confident the regime is permanent right before it gets stress-tested.

EWY behaves less like a country ETF (in the way EWG expresses Germany or EWJ expresses Japan) and more like a leveraged-feeling, unlevered expression of the global AI memory cycle, packaged inside a country wrapper. As long as that is true, the fund will keep doing what it did on Friday whenever the AI capex curve gets questioned, and it will keep doing what it did all year whenever the curve gets confirmed. Watch the Samsung qualification headline and watch Broadcom’s next print. Those are the two switches.