South Korean index KOSPI sees sharp fall after heavyweights decline, AI fears mount

South Korean equities came under sharp pressure as a technology-led rally paused, with investors growing cautious about the interest rate outlook and questioning how sustainable the surge in AI-related spending will be.

The benchmark Kospi slid 5.5%, marking its steepest single-day decline since November 21.

Heavyweight chipmakers Samsung Electronics and SK Hynix, which had powered the market's standout gains since early last year, fell over 4%.

The sell-off was driven by a combination of factors, including uncertainty surrounding Kevin Warsh's nomination as the next US Federal Reserve Chair and heightened volatility in metals markets.

Warsh checks a long list of boxes for Trump as his pick to run the Fed, with longstanding political and social ties to the president, deep Wall Street connections and a well-tailored demeanour.

But how deeply and quickly he will cut interest rates and how aggressively he will pursue his "regime change" at the Fed remain open questions.

Market sentiment took another hit after Nvidia CEO Jensen Huang said the widely reported $100 billion investment in OpenAI was "never a commitment", fuelling concerns over the pace and scale of future capital spending on artificial intelligence.

According to Gary Tan, portfolio manager at Allspring Global Investments, the comments weighed on near-term sentiment, especially for AI-linked stocks that have seen strong gains so far this year, and triggered profit-taking as crowded trades began to unwind.

Weakness was evident across the broader region as well, with the MSCI Asia Pacific Index down 1.7% on Monday.