South Korea's main stock market, the Kospi, dropped as much as 12.6% on July 29, 2026. Over two days, the market lost more than 40% of its value from the high point it reached just over a month earlier. The day before, July 28, the market had already fallen nearly 11% — its worst single day in about five months. Japan's stock market fell 1.5%, and TSMC (a major chipmaker in Taiwan) dropped 3%, but the center of the crisis was South Korea.

The reason comes down to two companies. SK Hynix and Samsung Electronics together make up more than half the entire value of the Kospi. When either of them has a bad day, the whole market goes down with them. On July 29, SK Hynix shares fell as much as 16% and Samsung fell nearly 10%. The day before, both had already dropped more than 13%. Bloomberg reported that SK Hynix had fallen as much as 20% during the day on July 28, before it even released its financial results.

The trigger was SK Hynix's earnings report for the second quarter of 2026, released at 9:00 AM Korean time on July 29. The numbers were, by any measure, record-breaking. Revenue came in at 79.32 trillion won (about $54.55 billion), up 257% from a year earlier. Operating profit was 60.5426 trillion won, and net profit reached 93.9226 trillion won — a 557% jump from the same period a year ago. Part of that profit was boosted by investment gains.

So why did the market crash? Analysts had expected revenue of about 84 trillion won, and the company fell short. But the bigger issue was what investors did not hear. They were looking for signs of long-term deals with customers and plans to return money to shareholders, and the earnings report said nothing about either. The sell-off had actually started the day before the results came out, as Reuters reported that investors were already questioning whether chip stocks were priced too high.

Trouble had been building for weeks. On July 8, the Kospi had already fallen 5.35% to 7,246.79, down 20% from its June high, driven by swings in chipmaker stocks. Around July 13, SK Hynix had listed its shares on the Nasdaq, the US tech stock exchange, in a sale valued at $29 billion — potentially the largest first-time share sale by a foreign company ever. Those US-listed shares fell 9.3% on their second day of trading, and the turmoil spread from South Korea into the US market. By July 28, a broad measure of Asian stocks had fallen 10% from its June peak.

Other pressures made things worse. Bloomberg reported that China appeared to be making progress in manufacturing advanced computer chips, which worried investors about whether AI-related spending could keep growing. There were also concerns about debt tied to AI investments. On Wall Street, US chip companies including Intel, AMD, Sandisk, Western Digital, and Seagate Technology all fell on July 28. But the effects were selective: Apple's stock briefly rose above $5 trillion in value that same day, making it the second company ever to reach that mark. Oil prices also rose, with Brent crude climbing to $87.14 a barrel.

The broader context here is that investors had expected everything to go perfectly for companies making AI chips, and now they are rapidly adjusting those expectations downward. SK Hynix's numbers, on their own, are remarkable: revenue grew from 52.5763 trillion won in the first quarter to 79.32 trillion won in the second, and net profit nearly tripled from the first quarter's 40.3459 trillion won. A 557% year-over-year profit increase at a company this large is a big deal. But the market reaction shows that expectations had climbed even higher than these results. The miss against the 84 trillion won estimate is part of the story. The deeper frustration was the lack of any forward-looking signals about long-term supply deals or commitments to return cash to shareholders.

Think of the Kospi like a table resting on two legs: SK Hynix and Samsung. If one leg wobbles, the whole table shakes. And because SK Hynix recently started selling shares on the Nasdaq in the United States, turbulence can now flow back and forth between Seoul and New York more easily than before.

The China factor adds a geopolitical layer. If Chinese companies get better at making advanced chips, Korean chipmakers lose their edge. Investors are now considering the possibility that spending on AI infrastructure may not keep growing forever — it could slow down, or profit margins could shrink. Bloomberg also reported concerns about debt levels tied to AI investments, suggesting that the money funding the AI boom is itself being questioned.

What happens next will depend on several things we cannot yet know: how much demand there is for high-bandwidth memory chips (the type used in AI systems) from big cloud companies, how fast China builds up its own chip industry, and whether SK Hynix and Samsung can give investors confidence that their profits will keep growing. For now, the market's message is clear: in this moment, even record profits are not enough.