Seoul shares dip over 3% amid escalating AI woes

South Korean stocks plunged more than 3 percent Tuesday, driven by heavy tech sell-offs amid escalating woes about massive artificial intelligence (AI) spending. The Korean won was trading higher against the US dollar.

After opening 2.46 percent lower, the benchmark Korea Composite Stock Price Index extended losses to close at 5,648.79, down 210.29 points, or 3.59 percent.

Trade volume was light at 192.4 million shares worth 14.1 trillion won ($10.5 billion), with decliners beating gainers 656 to 220.

Foreigners and institutions were net sellers, offloading a net 1.5 trillion won and 511.7 billion won, respectively, while individuals scooped up a net 1.7 trillion won.

Overnight on Wall Street, tech and AI-related shares remained shaky, dragging down the Nasdaq Composite by 1.07 percent and the S&P 500 by 0.51 percent.

The PHLX chip index fell 3.4 percent, following a 7.2 percent plunge Friday.

Investors doubted the productivity and profitability from excessive spending on AI infrastructure, given some global tech companies' recent disappointing earnings reports.

They also remained cautious ahead of the start of voting in the US midterm elections, where President Donald Trump's Republican Party is facing an uphill challenge to keep its majority in Congress.

"Concerns about profitability of AI investments persist," said Kim Seok-hwan, an analyst at Mirae Asset Securities. "A sharp drop in chip shares in the US stock market on the first trading day of November weighed heavily on the Korean market."

Semiconductor shares were the biggest losers.

Chip giant Samsung Electronics slumped 4.15 percent to 219,500 won, and SK hynix tumbled 5.03 percent to 1.4 million won.

SK Square, the parent of SK hynix, sank 5.37 percent to 899,000 won, and Samsung Electro-Mechanics, the electronic components unit of Samsung Electronics, lost 7.38 percent to 1.1 million won.

Leading internet portal operator Naver dipped 3.65 percent to 169,000 won, and its rival Kakao slid 3.03 percent to 28,800 won.

Oil refiners also fell as crude prices dropped sharply on hopes for a diplomatic solution in the Middle East. Industry leader SK Innovation plunged 9.36 percent to 119,100 won, and S-Oil dived 11.77 percent to 114,700 won.

The local currency was quoted at 1,341 won against the greenback as of 3:30 p.m., up 2.8 won from the close of the previous stock trading session.

Bond prices, which move inversely to yields, closed higher. The yield on three-year Treasurys fell 0.4 basis point to 3.736, and the return on the benchmark five-year government bonds dropped 2.2 basis points to 3.870.