South Korea's benchmark KOSPI index witnessed a sharp decline on Tuesday, falling 724.37 points, or 10.73 percent, to 6,031.38. The steep fall triggered a 20-minute trading halt after widespread selling swept through the country's technology sector, making South Korea one of the worst-performing equity markets during the global selloff.

The decline was primarily driven by a broad correction in semiconductor stocks as investors reassessed the sustainability of the artificial intelligence investment cycle. Despite Nvidia recently announcing more than $750 billion worth of AI infrastructure deals, market participants increasingly viewed the scale of AI-related capital expenditure as a potential risk rather than a growth catalyst. Analysts noted that investor sentiment had shifted from optimism to caution, leading to aggressive profit booking across AI-linked semiconductor companies.

Market concerns were further amplified by reports that a Chinese state-backed company had begun mass-producing immersion deep ultraviolet lithography equipment, a technology that could challenge the dominance of leading semiconductor equipment manufacturers. The development intensified worries over China's rapid progress in chip manufacturing despite ongoing US export restrictions, resulting in broad-based losses across global semiconductor equipment companies.

Technology stocks across Asia also came under pressure. Shares of major semiconductor equipment manufacturers and chip-related companies in Europe, Japan, Taiwan, and the United States recorded significant declines as investors reduced exposure to AI-driven technology stocks.

Within South Korea, heavy selling in technology giants Samsung Electronics and SK Hynix significantly weighed on the KOSPI index. Both companies registered double-digit declines during the session, reflecting growing concerns over semiconductor demand, elevated valuations, and weaker global investor sentiment. As the two companies together represent more than half of the KOSPI's market weighting, their sharp losses magnified the decline in the broader benchmark index.

The selloff highlights growing market sensitivity to developments in the global semiconductor industry, particularly as investors monitor AI investment trends, technological competition from China, and the outlook for chip demand.