South Korea’s KOSPI just handed global chip investors a jolt. The index closed down 10.84% overnight, with memory names leading the wreck: Samsung fell 13.39% and SK Hynix fell 14.65%. The massive drop in the Kospi is reverberating across the globe. Investors are fleeing to safety with DOW Futures up .21%. However, as of 6:30 a.m. ET, Nasdaq futures are down 0.84%, while chip stocks are dropping far harder in premarket.
Micron Leads Pre-Market Declines
Micron Technology (NASDAQ:MU | MU Price Prediction) is down 5.4%, and the VanEck Semiconductor ETF (NASDAQ:SMH) is down 2.9%. This lands after yesterday was another in a long series of sell-offs across momentum and chips stocks. The iShares MSCI USA Momentum Factor ETF (CBOE: MTUM), which tracks momentum stocks, was down 1.33% yesterday and is down 1.93% pre-market. The ETF is down nearly 14% from recent highs in pre-market trading.
Micron shares are already down 20.49% over the past month, yet fundamentals remain a different story: fiscal Q3 revenue of $41.46 billion and Q4 guidance of $50.0 billion ± $1.0 billion. SMH holds MU at 9.39%, so memory pressure hits the ETF directly. The VIX at 18.58 signals no broad panic yet, suggesting this is sector-specific, for now.
KOSPI Now Down 34% From Recent Highs
The KOSPI closed at 9,114.55 on June 22nd. At today’s close, it’s now at 6,023.66. That’s a 34% drop in a little more than a month. Despite this massive drop, the index is up 43% year-to-date. The Nasdaq opened in positive territory yesterday, but dropped after reports NVIDIA (Nasdaq: NVDA) was preparing up to $750 billion in new financing and partnerships with OpenAI and SK Hynix.
What to Watch Today
The KOSPI unwind has clearly spread across technology and momentum stocks. After a furious rally in April and May, valuations became stretched on many popular names. Korean investors became deeply concentrated in leveraged products that make the unwind even more painful. Watch to see whether ETFs like SMH and MTUM continue to severely underperform the index. If they’re both deep red and the Dow is in positive territory when markets open, we’re seeing the continuation of a broad rally out of risk assets.
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