South Korea’s KOSPI index crashed 10% on Tuesday, triggering a 20-minute trading halt after the benchmark breached the 8% decline threshold. The selloff, the steepest in years, was led by a more than 12% drop in shares of Samsung Electronics and SK Hynix, the two chipmaking giants that together account for over half the index’s weight. The rout erased roughly $4.6 billion from Samsung Executive Chair Jay Y. Lee’s fortune and saw foreign investors dump a net $2.5 billion in KOSPI shares. The shockwave rippled across time zones: Japan’s Nikkei 225 fell 3.6%, European indices from Frankfurt to Milan shed around 1%, and US futures pointed to a sharply lower open, with the Nasdaq set to extend Monday’s losses.

The immediate trigger was aggressive profit-taking after a rally that had delivered nearly 200% returns for the KOSPI over the past year, pushing valuations in AI-exposed semiconductor stocks to levels that analysts in Seoul described as overstretched. The correction was amplified by structural vulnerabilities: retail margin debt had reached a record 38.5 trillion won ($25 billion), and leveraged exchange-traded funds tracking chipmakers exacerbated forced liquidations as prices fell. Anxiety ahead of Micron Technology’s earnings—seen as a barometer for AI demand—and growing scepticism about the near-term returns on massive AI infrastructure spending added to the pressure. Simultaneously, traders in New York repriced Federal Reserve policy, assigning a near-90% probability to at least one rate hike by year-end, up from 57% a week earlier, as new Chair Kevin Warsh signalled a tougher line on inflation.

The selloff was not confined to Asia. Elon Musk’s SpaceX, which had surged after a record $75 billion IPO earlier in June, fell for a third straight session, losing more than $600 billion in market value and briefly dipping below its $150 debut price. The company’s announcement of a maiden $20 billion bond offering to fund AI expansion revived concerns that technology firms are financing ambitious capital spending with debt. In the US, Micron, Intel, and AMD each fell more than 6% in premarket trading, while European chip-equipment makers ASML and Infineon declined sharply. Oil prices slipped below $76 a barrel on progress in US-Iran talks, but the easing of geopolitical risk failed to lift equities as rate expectations dominated sentiment. The dollar strengthened to a one-year high against a basket of currencies, pressuring gold and emerging-market assets.

Attention now turns to Micron’s earnings on Wednesday, which will offer a direct read on memory chip demand and the pace of AI investment. The US personal consumption expenditures price index, the Fed’s preferred inflation gauge, follows on Thursday and will be critical in shaping rate expectations. In Seoul, the scale of retail leverage and the triggering of circuit breakers for the fourth time this year suggest that volatility may persist, with local analysts warning that further margin calls could extend the selloff.